Motley Fool Premium
  1. Category
    2. /
  2. Investing
    3. /
  3. Bank Stocks
    4. /

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. 

[KevelPitch adtype=151]

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

Top Articles

Bank Stocks

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?

Read more »

Bank Stocks

TSFA or RRSP – Better Place to Stash Cash in 2023?

| Amy Legate-Wolfe

If a recession hits us hard in 2023, you'll want the ability to take out cash if you need it.…

Read more »

Dividend Stocks

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…

Read more »

Bank Stocks

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…

Read more »

Bank Stocks

2 Bank Stocks to Load Up on in a Recession

| Chris MacDonald

Here are two top Canadian bank stocks investors may want to consider, particularly as we potentially head into a recession.

Read more »

Bank Stocks

Better Buy: RBC Stock or the Entire TSX?

| Brian Paradza, CFA

Buying Royal Bank of Canada (TSX:RY) stock lets you invest like Warren Buffett does, but investing in the entire TSX…

Read more »

Bank Stocks

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.

Read more »

Bank Stocks

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.

Read more »

Recent Bank Stocks News

Bank Stocks

Is CIBC (TSX:CM) a Good Stock to Buy Now?

| Andrew Walker

CIBC's stock price doubled off the 2020 low. The recent pullback has investors wondering if this is a good time…

Read more »

Dividend Stocks

Why Scotiabank Stock Could Be the Top Pick of This Summer

| Chris MacDonald

Investors in Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) certainly have a lot to like about this big Canadian lender.

Read more »

Dividend Stocks

3 Safe Canadian Dividend Stocks to Buy in July 2021

| Vineet Kulkarni

Here are three of the best Canadian dividend stocks to buy, as markets hang around their record-high levels.

Read more »

Dividend Stocks

3 TSX Stocks to Buy Now That Could Make You Rich

| Sneha Nahata

The upward trend in top TSX stocks continues, as the steady growth in the economy and uptick in demand continue…

Read more »

Energy Stocks

4 Top Canadian Stocks to Buy Before the End of This Month

| Rajiv Nanjapla

These four stocks offer excellent buying opportunities, despite the Canadian market trading at its peak.

Read more »

Dividend Stocks

3 Great Undervalued TSX Stocks to Buy Inexpensively

| Christopher Liew, CFA

Market analysts don’t see the TSX’s rally in 2021 ending soon. For inexpensive, undervalued choices, the top picks are National…

Read more »

Dividend Stocks

The 3 Best Canadian Stocks to Buy for July 2021

| Aditya Raghunath

Here's why dividend and income investors can buy stocks such as Enbridge and TD Bank right now.

Read more »

Dividend Stocks

Boost Your CPP and OAS Pension With 1 Simple Strategy

| Christopher Liew, CFA

Retiring Canadians can boost their CPP and OAS by taking advantage of both pensions’ delay incentive. You can also own…

Read more »

Dividend Stocks

4 Top Bargain TSX Stocks to Buy Today With $1,000

| Sneha Nahata

These TSX stocks still look inexpensive and are solid long-term bets.

Read more »

Bank Stocks

Is Royal Bank (TSX:RY) a Good Stock to Buy Now?

| Andrew Walker

Royal Bank has delivered great returns for long-term investors. Should you buy the shares now or wait?

Read more »

Dividend Stocks

1 Top TSX Pandemic Reopening Play to Buy Right Now

| Chris MacDonald

Here's why Toronto-Dominion Bank (TSX:TD)(NYSE:TD) remains a top pandemic reopening pick investors should consider today.

Read more »

Dividend Stocks

Best Value Stocks: 2 Canadian Stars

| Jared Seguin

The TSX is home to many stocks that are undervalued in the long run. Find out why these are two…

Read more »

Dividend Stocks

2 Top Canadian Stocks to Buy Now

| Stephanie Bedard-Chateauneuf, MBA

Bank of Montreal (TSX:BMO)(NYSE:BMO) and Manulife Financial Corp (TSX:MFC)(NYSE:MFC) are two top Canadian stocks to buy now

Read more »

Dividend Stocks

TFSA Investors: 2 TSX Dividend Stocks to Buy and Hold Forever

| Aditya Raghunath

Canadian banks such as Royal Bank of Canada and Toronto-Dominion Bank are poised to increase their dividends in the near…

Read more »

Dividend Stocks

Wise Money Tip: The $3.2 Trillion TSX Is the Market to Invest in Today

| Christopher Liew, CFA

The inflow of foreign money into the TSX indicates high investors’ confidence. For Canadians, Royal Bank of Canada stock remains…

Read more »

Dividend Stocks

My 3 Best TSX Stocks to Buy and Hold Long-Term

| Adam Othman

Every investor has their favourites when it comes to long-term holdings, but there are some golden stocks that should be…

Read more »

Dividend Stocks

2 Cash-Rich Bank Stocks That Could Raise Dividends

| Christopher Liew, CFA

The significant reductions in PCLs filled the Big Five banks’ war chest in 2021 considerably. Now, Toronto-Dominion Bank, Bank of…

Read more »

Bank Stocks

Canadian Banks: Buy This Dividend Aristocrat on the Way up!

| Joey Frenette

Bank of Montreal (TSX:BMO)(NYSE:BMO) went from worst to one of the first Canadian bank stocks to buy, and it's still…

Read more »

Energy Stocks

4 Top Canadian Stocks (Under $100) to Buy Today

| Sneha Nahata

With the improving operating environment in the background, I see strong growth in these four under-$100 stocks.

Read more »

Dividend Stocks

Got Zero RRSP Savings? Start With Your TFSA First!

| Christopher Liew, CFA

The practical approach for Canadians who are starting to save for the future is to use the TFSA first and…

Read more »

Dividend Stocks

2 Must-Own Stocks for All Canadians

| Christopher Liew, CFA

Bank of Montreal stock and Fortis stock are top-notch, long-term assets. Both offer income stability and, therefore, are must-own stocks…

Read more »

Dividend Stocks

3 Top ETFs to Buy Today

| Puja Tayal

Are you thinking of investing in ETFs? Then you should read this as I bring to you my top ETF…

Read more »

Bank Stocks

This Canadian Mid-Cap Stock Could Be an Excellent Buy Right Now

| Rajiv Nanjapla

Amid a growing addressable market, expanding market share, accretive acquisition, and its growth initiatives, goeasy would be an excellent buy…

Read more »

Dividend Stocks

These 2 Top TSX Financials Stocks Are Set to Soar

| Chris MacDonald

Here's why Manulife (TSX:MFC)(NYSE:MFC) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are top TSX financials picks right now.

Read more »

Dividend Stocks

1 Growth Catalyst to Be Aware of With Royal Bank Stock

| Chris MacDonald

Investors in Royal Bank (TSX:RY)(NYSE:RY) stock certainly have a lot to like right now, and here's one more catalyst.

Read more »

Bank Stocks

3 High-Caliber Canadian Stocks to Buy Right Now

| Sneha Nahata

I see strong growth potential in these high-caliber Canadian stocks.

Read more »

Bank Stocks

3 Dirt-Cheap Value Stocks for Summer 2021

| Andrew Button

Stocks are getting pretty expensive, but some value stocks like Enbridge Inc (TSX:ENB)(NYSE:ENB) may still be good buys.

Read more »

Dividend Stocks

StatsCan: $22.7 Billion Cash From Overseas Floods the TSX

| Christopher Liew, CFA

Canadians should follow the lead of overseas investors who are piling up on TSX stocks. Canadian Imperial Bank of Commerce…

Read more »

Dividend Stocks

3 Top Dividend Aristocrats to Buy Today

| Jed Lloren

Are you interested in three stocks that should serve as the cornerstone of your dividend portfolio? Here are my top…

Read more »

Dividend Stocks

Why Canadian Banks Could Outperform the Market This Year

| Chris MacDonald

Here's why Royal Bank of Canada (TSX:RY)(NYSE:RY) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are two top Canadian banks to buy today.

Read more »

Dividend Stocks

3 Top Canadian Stocks for Consistent Dividend Income

| Sneha Nahata

Only a few companies have consistently paid and increased their dividends for a very long period.

Read more »

calculate and analyze stock
Dividend Stocks

2 Amazing Canadian Long-Term Buy-and-Hold Opportunities

| Chris MacDonald

Here's why long-term investors ought to consider Manulife (TSX:MFC)(NYSE:MFC) and Kirkland Lake Gold (TSX:KL)(NYSE:KL) right now.

Read more »

Energy Stocks

Got $1,000? Here Are 4 Top Canadian Stocks to Buy Right Now

| Rajiv Nanjapla

These four Canadian stocks could outperform the broader equity markets this year.

Read more »

Tech Stocks

4 Canadian Stocks That Could Deliver Multi-Fold Returns Over the Next 10 Years

| Rajiv Nanjapla

Given the favourable industry trend and their growth initiatives, these four Canadian stocks could deliver multi-fold returns over the next…

Read more »

Dividend Stocks

3 RRSP Stocks to Help You Stay Ahead of Inflation

| Adam Othman

In May, the inflation in Canada rose to the highest level in the decade (3.6%). It’s a scary reminder about…

Read more »

Energy Stocks

3 Top TSX Stocks to Own for Decades

| Andrew Walker

These three top TSX stocks deserve to be on your TFSA and RRSP buy list.

Read more »

Energy Stocks

3 of the Best Long-Term TSX Stocks That Could Make You Rich

| Sneha Nahata

The long-term prospects of the top TSX stocks remain intact. Meanwhile, improving economic indicators and recovery in corporate earnings further…

Read more »

Dividend Stocks

Got $3,300 to Invest? 2 Top TSX Stocks for a TFSA

| Andrew Walker

Investors can still find good value in the TSX for a TFSA portfolio. These two stocks look attractive today and…

Read more »

Dividend Stocks

The Smartest Stocks to Buy With $300 Right Now

| Kay Ng

You don’t need tonnes of money to start building wealth. The smartest stocks to buy now include this tech stock,…

Read more »

Dividend Stocks

Invest for Long-Term Growth With These Top 3 TSX Stocks

| Chris MacDonald

These three top TSX stocks ought to make every long-term growth investor's watch list in this current environment.

Read more »

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.