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Bank Stocks

What are bank stocks?

Bank stocks represent partial ownership in a financial institution that’s licensed to hold and loan money. Over time, bank stocks have been relatively safe investments, as they offer products and services that most people need.

How do you choose a good bank stock? 

1. Look at the bank’s profitability

First, you want to be sure the bank is even profitable. To do that, you can use the following metrics. 

  • Return on equity (ROE): this metric tells you how much profit a bank makes from its shareholder’s equity. The higher this metric, the more efficient a bank is using its stakeholder’s money. 
  • Return on assets (ROA): the ROA tells you the overall profit a bank makes in relation to its assets. The higher the ROA, the more profit a bank makes from its assets. 
  • Efficiency ratio: the efficiency ratio tells you how much revenue a bank uses towards its operating costs. The lower the efficiency ratio, the more revenue a bank theoretically has. 

2. Assess the bank’s risks 

One of the biggest risks a bank has is losing money on an outstanding loan. As with profitability, a couple metrics could help you see how much banks are losing.

  • Nonperforming loans ratio (NPL): Nonperforming loans are loans that are at least 90 days past their due date. A bank with a low percentage of NPL (2% is a good ratio) is doing fairly well collecting loan repayments from its customers. 
  • Net charge-offs: a net charge-off is a bank’s declaration stating that a loan hasn’t been paid and is unlikely to be paid. As with NPLs, the less net charge-offs a bank has, the less money it’s losing on outstanding loans. 

3.  Check back here for our top picks 

Finally, we’ll keep this page updated with our staff writer’s reviews and assessment of Canada’s bank stocks. Our writers often use these metrics to help investors see which bank stocks are doing well and which are doing poorly. 

Check back here for the most up to date information about bank stocks in Canada.

Top Articles

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| Andrew Button

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| Aditya Raghunath

Use the tax breaks to lower your tax bill and purchase blue-chip TSX stocks such as Royal Bank of Canada.

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| Andrew Button

TD Bank (TSX:TD)(NYSE:TD) stock is out of favour now but could come back in a big way.

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Recent Bank Stocks News

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Why BNS Stock Fell 26% in 2022

| Andrew Walker

Bank Nova Scotia's share price took a beating in 2022. Is BNS stock now oversold?

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Why TD Stock Fell 9.6% in 2022

| Kay Ng

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Is CIBC Stock a Buy in January 2023?

| Amy Legate-Wolfe

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Is BNS Stock a Buy in January 2023?

| Andrew Walker

Bank of Nova Scotia stocks looks cheap right now. Is this a good time to buy or should investors wait?

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3 Top Bank Stocks to Buy After Earnings Season

| Ambrose O'Callaghan

I’m looking to buy discounted and high-yield bank stocks like Canadian Imperial Bank of Commerce (TSX:CM) before the new year.

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| Sneha Nahata

goeasy has compounded investors’ wealth and is poised to deliver stellar returns in the coming years.

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Investing in 2 Regional Banks Just Got a Lot More Lucrative

| Christopher Liew, CFA

Two regional banks became more enticing investments for 2023, like the Big Banks, for their juicy and higher dividends.

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| Amy Legate-Wolfe

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| Kay Ng

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Should You Buy Big Canadian Bank Stocks Going Into 2023?

| Kay Ng

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This High-Yield Dividend Stock is a No-Brainer

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Is Now Actually the Perfect Time to Buy goeasy Stock?

| Sneha Nahata

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These 2 Canadian Banks Just Raised Their Dividends

| Christopher Liew, CFA

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Is BNS Stock a Buy in December 2022?

| Kay Ng

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| Vineet Kulkarni

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Should You Buy BMO Stock or TD Stock for U.S. Exposure?

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The Big Banks Predict Just a “Mild” Recession: Is it Safe to Buy Bank Stocks?

| Andrew Button

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Is RBC Stock a Buy in December 2022?

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| Karen Thomas, MSc, CFA

Canadian banking stocks like TD Bank have been anchors that have provided investors' portfolios with strong long-term growth and income.

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2 Big Bank Stocks With Unused Pandemic Reserves I’d Buy This Year-End

| Christopher Liew, CFA

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| Rajiv Nanjapla

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Should You Buy CIBC Stock Now?

| Andrew Walker

CIBC stock looks cheap. Is it a good buy today, or is more downside on the way?

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TFSA Investors: Why You Should Invest Your Room ASAP With These 3 Stocks

| Adam Othman

Choosing the right TFSA stocks for your portfolio might take some time. But with the right choices, you can stick…

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Scotiabank Stock Rose 5.6% in November: Is it a Buy Today?

| Ambrose O'Callaghan

Scotiabank (TSX:BNS) stock had a strong performance in November. Investors should look to buy this bank stock after earnings.

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3 Cheap Financial Stocks to Buy Now and Never Sell

| Amy Legate-Wolfe

Financial stocks, specifically bank stocks, are solid choices for long-term income both from growth and dividends.

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RBC Stock Rose 6% in November: Is it a Buy Today?

| Andrew Walker

Royal Bank stock is off the 2022 highs. Is now a good time to buy?

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Is Now the Right Time to Buy Canadian Bank Stocks?

| Andrew Button

Some bank stocks, like Toronto-Dominion Bank (TSX:TD) are doing well; others, not so much. Is it time to buy bank…

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A worker gives a business presentation.
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BMO Stock Rose 6% in November: Is it a Buy Today?

| Vineet Kulkarni

Is it time to buy BMO stock?

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Should You Buy Bank of Montreal Stock Now?

| Andrew Walker

Bank of Montreal is making a big acquisition. Is BMO stock an attractive buy?

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Should You Buy TD Bank Stock Now?

| Andrew Walker

TD stock is catching a tailwind after the Q4 results. Is more upside on the way?

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Should You Buy Royal Bank Stock Now?

| Andrew Walker

Royal Bank just reported solid fiscal 2022 earnings. Is the stock a buy today?

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3 TSX Stocks to Buy Before the New Year

| Amy Legate-Wolfe

These three TSX stocks offer the best opportunity for quick growth in 2023, because each has nicely rebounded before.

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Frequently Asked Questions

Why invest in bank stocks?

Quality bank stocks have a strong history of generating profits and managing crises, making them a great investment.

In addition to their strong performance, many of Canada’s top banks pay dividends, with payouts that increase over time. For Canadian investors looking to pocket a little extra from their stocks, dividends can help you buy more shares or more cash.

Finally, bank stocks can help diversify your investing portfolio. If you already have stocks in other sectors (mining, technology, energy), bank stocks could add much needed stability, as well as expose you to the gains in another sector.