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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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2 Bank Stocks to Load Up on in a Recession

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| Brian Paradza, CFA

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| Aditya Raghunath

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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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CPP Benefits: How to Avoid the Dreaded OAS Clawback

| Andrew Button

Holding Toronto-Dominion Bank (TSX:TD) stock in an RRSP can lower your taxable income.

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| Andrew Button

You can get a lot of passive income by holding dividend stocks like the Toronto-Dominion Bank (TSX:TD) in a TFSA.

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Better Buy: TD Stock or Royal Bank Stock?

| Andrew Button

Toronto-Dominion Bank (TSX:TD) and Royal Bank (TSX:RY) are two of Canada's top banks. Which is better?

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Bargain Alert: I’ve Been Buying Dips in These Canadian Bank Stocks

| Kay Ng

These Canadian bank stocks offer nice, passive, dividend income that serve as a good basis for solid long-term returns.

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TD Bank Stock: Buy, Sell, or Hold Now?

| Christopher Liew, CFA

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| Jitendra Parashar

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Should You Buy Scotiabank Stock for its 6.6% Dividend Yield?

| Aditya Raghunath

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TD Bank Stock: Buy, Sell, or Hold?

| Amy Legate-Wolfe

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TD Bank Stock: Worth the Risk for Long-Term Gains

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Down 11%, Should Investors Buy TD Stock Ahead of Earnings?

| Amy Legate-Wolfe

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RBC Stock: Rock Solid for Dividends and Growth

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How to Use Your TFSA to Earn $4,750 in Annual Passive Income

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| Andrew Button

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Is TD Bank Stock a Good Buy Now?

| Joey Frenette

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Thinking of Loading Up on Cheap TD Stock? Read This First

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A Dividend Titan I’d Buy Over Royal Bank Stock

| Aditya Raghunath

While Royal Bank of Canada has delivered inflation-beating returns to shareholders, National Bank remains a better buy today.

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TFSA Income Stream: 2 Top Dividend Stocks to Own for Decades

| Jitendra Parashar

By adding these two top dividend stocks from the bank sector to your TFSA now, you can expect to receive…

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TD Stock Has Fallen to a Low of $73: Is it Done Dropping?

| Demetris Afxentiou

TD (TSX:TD) is often viewed as a great long-term investment. But given its volatility in recent months, has TD stock…

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This 6.9% Yielding Dividend Stock Remains a Top Choice for Passive Income

| Andrew Button

High yield dividend stock First National Financial (TSX:FN) remains a good value.

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CRA: Are You Eligible for the $496 GST/HST Refund in 2024?

| Aditya Raghunath

Here's how investors can consider reinvesting proceeds from tax credits such as the GST/HST to build long-term wealth.

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Big Bank Bull Run? 2 Canadian Bank Stocks Overdue for a Rally

| Demetris Afxentiou

Looking to invest in the best Canadian bank stocks? Here are two options that still trade at a discount and…

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BMO vs. BNS: Which Bank Stock Is a Better Buy?

| Kay Ng

Let's explore whether Bank of Nova Scotia or Bank of Montreal is a better buy today seeing as they have…

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Better Buy: TD Bank Stock vs. BMO

| Joey Frenette

TD Bank (TSX:TD) and Bank of Montreal (TSX:BMO) are the kings of banking value this summer.

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Bank Stocks

Canadian Bank Stocks: Buy, Sell, or Hold?

| Christopher Liew, CFA

Canadian bank stocks are rock-solid investments, but one is a no-brainer buy following the recent interest rate cut.

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Better Stock to Buy Now: TD Bank or Scotiabank?

| Chris MacDonald

As far as the large Canadian banks are concerned, let's dive into two of the best and see which one…

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Should You Load Up on TD Stock Now?

| Andrew Walker

TD stock is near its lowest price in three years. Is TD Bank now oversold?

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A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Bank Stocks

TD Stock’s Dividend Yield Hits 5.4%: Is It Finally Time to Buy?

| Kay Ng

While TD Bank stock trades sideways, it's a good time to lock in a higher dividend yield.

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National Bank to Buy Canadian Western Bank: What Investors Need to Know

| Joey Frenette

National Bank of Canada (TSX:NA) is acquiring Canadian Western Bank (TSX:CWB) in a historic deal for Canadian banks.

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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.