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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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| 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

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Still the Heavyweights in 2022: Big 5 Bank Stocks

| Christopher Liew, CFA

Risk-averse investors are safe owning the Big Five bank stocks in 2022, because they are durable investments, regardless of the…

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2 Blue-Chip Bank Stocks Canadians Can Buy and Hold Forever

| Aditya Raghunath

Royal Bank of Canada and National Bank of Canada are two blue-chip stocks Canadians can buy and hold forever.

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This Big Bank Is a Superb Value Buy

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| Kay Ng

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This Canadian Bank Is Buying Back 3% of its Stock!

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| Amy Legate-Wolfe

This one Big Six bank offers a super-high dividend for ultimate passive income but safety as well to create a…

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2 Top TSX Bank Stocks to Buy for Total Returns

| Chris MacDonald

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Why Have Bank of Montreal (TSX:BMO) Stock in Your Portfolio?

| Sneha Nahata

Bank of Montreal is a solid bet for investors seeking regular income along with solid growth.

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Canadians: Should You Buy TD Bank (TSX:TD) Stock on the Dip?

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New Investors: 1 Stock Is All You’ll Need to Bank on the Big 6

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Load Up on These 2 Bank Stocks

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3 Cheap Bank Stocks to Buy Today

| Ambrose O'Callaghan

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TD Bank Stock: This Blue-Chip Company Remains a Top Bet in 2022

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Big 5 Bank Stocks: Top 2 Picks in Canada

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Is Bank of Nova Scotia (TSX:BNS) Stock Undervalued?

| Tony Dong, MSc, CETF®

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3 Bank Stocks Offering Insane Value on the TSX Today

| Amy Legate-Wolfe

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| Tony Dong, MSc, CETF®

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| Puja Tayal

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Is Bank of Montreal (TSX:BMO) Stock Undervalued?

| Tony Dong, MSc, CETF®

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| Demetris Afxentiou

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1 Top Canadian Banking Giant to Watch Now

| Joey Frenette

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2 Top Bank Stocks to Buy in Canada

| Christopher Liew, CFA

Two Canadian bank stocks with strong tailwinds are the top choices today in the sector and considered by many as…

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Should You Buy Bank of Montreal (TSX:BMO) on the Dip?

| Ambrose O'Callaghan

Canadian investors may want to snatch up Bank of Montreal (TSX:BMO)(NYSE:BMO) stock on the dip after the recent rate hike.

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The Cheapest Canadian Bank Stock You Can Buy Now

| Kay Ng

Canadian bank stocks are solid anchors to investors' long-term portfolios. This is the cheapest Canadian bank stock right now.

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CIBC (TSX:CM) Stock: A 4% Ultra-Safe Yield

| Andrew Button

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) sports a safe, well-covered 4% yield.

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ALERT: Here’s Why I’m Buying Bank Stocks After the Rate Hike

| Ambrose O'Callaghan

The Bank of Canada (BoC) rate hike should spur investors to snag top bank stocks like Royal Bank of Canada…

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3 Bank Stocks That Are a No-Brainer Buy

| Adam Othman

If you plan to hold them long term, some bank stocks might even be good buys when they are relatively…

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CIBC Stock: Too Cheap to Ignore?

| Andrew Walker

CIBC trades at an attractive multiple after the recent pullback in the stock price.

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Bank Stocks

Is it Time to Buy Bank of Nova Scotia Stock?

| Andrew Walker

Bank of Nova Scotia stock is starting to look cheap.

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3 Canadian Bank Stocks to Add for Stability Right Now

| Chris MacDonald

Here are three top Canadian bank stocks I think investors with a long-term investing time horizon may want to consider…

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Should You Buy TD Bank or Royal Bank Stock Now?

| Andrew Walker

Canadian bank stocks are under pressure. Is this the right time to buy?

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Should You Buy Bank of Nova Scotia Stock?

| Jed Lloren

Bank of Nova Scotia is one of the most popular stocks in Canada. Should you buy it today?

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TD Bank Stock: Should You Buy the Dip?

| Ambrose O'Callaghan

TD Bank (TSX:TD)(NYSE:TD) stock has slipped to start 2022, as the promise of interest rate hikes has rattled the financial…

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With or Without a Surtax: 2 Big Bank Stocks to Own in Your TFSA

| Christopher Liew, CFA

Despite the new tax measure, or surtax, on profitable financial institutions, two big bank stocks remain ideal anchors for TFSA…

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My New List of Top ETFs for April 2022

| Puja Tayal

ETF buying is a good way to get stock market returns without studying the intricacies of the market. Here’s my…

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Bank of Montreal (TSX:BMO): A Superb Growth and Income Stock

| Demetris Afxentiou

There are few stocks on the market that can provide superb growth and income potential. Bank of Montreal (TSX:BMO)(NYSE:BMO) can…

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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.