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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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Is Now the Right Time to Buy Canadian Bank Stocks?

| Andrew Button

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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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CRA: 3 Big Changes Coming to 2023 Tax Breaks

| 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

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2 Canadian Banking Giants to Crush Inflation

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Save Tax: Buy 3 TSX Stocks in an RRSP Before March 1

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| Rajiv Nanjapla

Given their healthy growth prospects, these three Canadian stocks could be an excellent addition to your TFSA account.

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The TSX’s dividend pioneer will not disappoint income investors even if economic growth slows down as an offshoot of higher…

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| Puja Tayal

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| Aditya Raghunath

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Will High Interest Rates Support Dividend Growth in 2022?

| Christopher Liew, CFA

Some market analysts believe that despite the looming interest rate hike, corporate profitability and free cash flow generation could support…

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Top February TSX Stock Pick: TD Bank Is a Buy for Passive Income

| Joey Frenette

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Why Scotiabank Is a Dividend Stock to Buy Now and Never Sell

| Chris MacDonald

Here's why Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is a top dividend stock I'm considering right now.

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Why CIBC Stock Is the Best Big Six Bank to Buy

| Amy Legate-Wolfe

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Another Reason to Buy TD Stock Right Now

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1 Top Bank Stock for Investors Looking to Boost Their Passive Income in 2022

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Big 6 Bank Stocks Could Soar With Interest Rate Hikes

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My Best Value Pick to Buy Amid the Market Plunge

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2 Top Canadian Bank Stocks to Buy Right Now

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These two top Canadian bank stocks are among the best options for investors seeking income, growth, and safety right now.

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Interest Rate 2022: 8 Hikes Needed to Cool Inflation

| Christopher Liew, CFA

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Will TD Bank Stock Keep Outperforming in 2022?

| Andrew Button

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2 Undervalued Bank Stocks That Yield Over 3.5%

| Adam Othman

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| Joey Frenette

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| Andrew Button

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TFSA Investors: 2 Top Canadian Bank Stocks to Buy

| Karen Thomas, MSc, CFA

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Why Toronto-Dominion Bank Stock Rose 37% in 2021

| Vishesh Raisinghani

TD Bank (TSX:TD)(NYSE:TD) stock is up 37% over the past year because of organic earnings growth.

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Why Royal Bank of Canada Stock Rose 30% in 2021

| Vishesh Raisinghani

Royal Bank of Canada (TSX:RY)(NYSE:RY) stock is up because of growing earnings.

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Why National Bank of Canada (TSX:NA) Stock Climbed 39% in 2021

| Ambrose O'Callaghan

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Why Canadian Imperial Bank of Commerce Stock Climbed 39% in 2021

| Amy Legate-Wolfe

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Why Bank of Montreal Stock Rallied 41% in 2021

| Jitendra Parashar

Bank of Montreal (TSX:BMO)(NYSE:BMO) stock could continue soaring in 2022. Here’s why.

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Why Bank of Nova Scotia (TSX:BNS) Stock Soared 30% in 2021

| Andrew Walker

Bank of Nova Scotia stock ended 2021 with solid earnings and a large dividend increase.

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Strong Buy: BMO’s Adjusted Earnings to Increase 10% in 2024

| Christopher Liew, CFA

TSX’s dividend pioneer should be a strong buy in 2022, as it prepares to complete the largest acquisition by a…

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The 3 Top Bank Stock Performers in 2021: Which Is the Best Buy Today?

| Ambrose O'Callaghan

Bank stocks like Bank of Montreal (TSX:BMO)(NYSE:BMO) put together a great 2021. Can investors count on a repeat in 2022?

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Bank of Montreal (TSX:BMO): A Dividend Rock Star I’d Hold Through 2022

| Joey Frenette

Bank of Montreal (TSX:BMO)(NYSE:BMO) is a dividend rock star that TFSA investors should carefully consider if they seek performance in…

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My Top Bank Stocks to Own in 2022

| Ambrose O'Callaghan

Canadian investors should look to snag top bank stocks like Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and others for 2022.

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2 Bank Stocks With Unbelievable Dividends to Buy

| Adam Othman

While dividends are not the only reason to add Canadian banks to your portfolio, they are usually the primary motive.

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Maximum CPP Premiums to Jump 10.5% in 2022: How You Can Combat it!

| Kay Ng

Your CPP premiums are probably increasing in 2022. Here's how you can combat the raise with your investments!

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3 TSX Stock Market Predictions for 2022

| Robin Brown

TSX stocks are bound to have another wild ride in 2022. Here are three of my top stock market predictions…

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Want Pension-Like Income? The TSX’s Dividend Pioneer Nears a 200-Year Track Record

| Christopher Liew, CFA

A big bank stock and the TSX’s dividend pioneer is the logical choice if you want pension-like income.

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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.