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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 Walker

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| Andrew Button

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2 Bank Stocks to Load Up on in a Recession

| Chris MacDonald

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| Brian Paradza, CFA

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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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The 1 TSX Stock I’d Go All-In On

| 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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Bet on This Top Canadian Stock’s Post-Recession Recovery

| Joey Frenette

In murky market waters, TD Bank is a great long-term buy for its stable and growing dividend.

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| Christopher Liew, CFA

Even in a volatile market environment, Canadians can improve retirement readiness in 2022 or beyond by sacrificing some of their…

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Is CIBC (TSX:CM) 1 of the Best Bank Stocks to Buy Now?

| Daniel Da Costa

Although all of the Big Six bank stocks in Canada have fallen in value this year, CIBC looks like it…

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Should You Buy Royal Bank Stock at Current Levels?

| Vineet Kulkarni

RY stock has dropped 20% since January, underperforming broader markets. Is Canada's biggest bank still a buy?

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Bank of Montreal Stock: Should You Buy Now or Wait?

| Kay Ng

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Bank of Nova Scotia Stock: Should You Buy Now?

| Andrew Walker

Bank of Nova Scotia stock just dropped on big news. Is BNS stock now oversold?

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Bank Stocks

TD Bank (TSX:TD): Massive U.S. Deal Could Close Soon

| Andrew Button

The Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is about to close a $13.4 billion U.S. deal, sources say.

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Why You Can’t Rely on the Common Sources of Retirement Income  

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Buy Bargain Stocks and Make Tonnes of Money in This Market Downturn

| Kay Ng

Now is a good time to review your buy list to shop for bargain but quality TSX stocks over the…

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| Amy Legate-Wolfe

Stop making life so complicated. Buy this dividend stock and see your $5,000 turn into $50,000 in your TFSA.

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Why BMO Stock is the Best of the Big Six Banks

| Amy Legate-Wolfe

BMO stock (TSX:BMO)(NYSE:BMO) has a strong 200-year history of share and dividend growth, and right now it's absurdly cheap.

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Want Enduring Value-for-Money? Pick 1 of 2 Big Bank Stocks

| Christopher Liew, CFA

Two Canadian Big Bank stocks are not only trusted brands, but also offer enduring value-for-money to stock investors.

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Why Laurentian Bank (TSX:LB) Stock Fell to 2-Year Lows Last Week

| Vineet Kulkarni

Should you buy LB stock after its massive correction?

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Better Buy: BNS Stock or CIBC Shares?

| Kay Ng

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| Demetris Afxentiou

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Toronto-Dominion Bank (TSX:TD) – Should You Buy the 4% Yield?

| Andrew Button

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| Joey Frenette

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Bank of Nova Scotia: Time to Buy This Canadian Bank Stock?

| Andrew Walker

TFSA and RRSP investors can now buy top TSX dividend stocks at cheap prices.

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| Vineet Kulkarni

Asset allocation plays an important role when planning for retirement, and should be driven by your investment horizon and risk…

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| Christopher Liew, CFA

These 2 high-yield Big Bank stocks with dividend track records of 190 years can help Canadians build wealth and retire…

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| Andrew Walker

The market pullback is giving TFSA investors an opportunity to buy top TSX dividend stocks at cheap prices.

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3 Recession Resistant Stocks to Buy Right Now

| Demetris Afxentiou

Looking for some recession resistant stocks to add to your portfolio? Here are three options to buy right now.

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Here’s Why TD Bank (TSX:TD) Is Still My Top Bank Stock

| Ambrose O'Callaghan

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock looks like the strongest of its peers after its third-quarter earnings release.

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3 Side Hustles That Can Get You Investing for Free

| Amy Legate-Wolfe

Side hustles can be a great way to bring in extra cash, and can even turn into a full-time gig!…

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2 Safe Dividend Paying Stocks to Buy on the TSX Today

| Christopher Liew, CFA

Canadian investors can counter market volatility and earn a steady stream of passive income by buying two safe dividend-paying stocks…

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Should You Buy goeasy (TSX:GSY) at These Levels?

| Rajiv Nanjapla

Given its high-growth prospects, attractive valuation, and solid dividend growth, I am bullish on goeasy.

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Better Buy: RBC Stock or BNS Shares?

| Kay Ng

The big Canadian bank stocks are great choices for passive income. Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) stock is relatively cheap…

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Bank Stocks

TFSA and RRSP Investors: Here’s a Better Bank Stock for Your Buck

| Joey Frenette

TD Bank (TSX:TD)(NYSE:TD) stock looks like a terrific value after its latest quarterly earnings beat.

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Bank Stocks

TD Bank: Time to Buy the Stock?

| Andrew Walker

TD Bank looks cheap at the current share price. Should you buy TD stock now or wait?

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Bank Stocks

Banking Stocks: The Ultimate Dirt Cheap Sector

| Andrew Button

Banking stocks like TD are dirt cheap, and offer stable, growing dividends.

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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.