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

Stocks for Beginners

Buy This Mini 4-Stock Portfolio for Quality TSX Access

| Victoria Hetherington

Silvercorp Metals (TSX:SVM)(NYSE:SVM) and three other stocks offer a quick way to build a new TSX portfolio built around quality.

Read more »

Dividend Stocks

Why Royal Bank Is a “Forever” Stock to Put in Your RRSP and Forget About for 30 Years

| Chris MacDonald

Here's why I think Royal Bank (TSX:RY)(NYSE:RY) is a stock to get married to forever!

Read more »

Bank Stocks

TD Bank Stock (TSX:TD): The Top Bank Stock to Buy Today

| Karen Thomas, MSc, CFA

While 2021 will be a difficult year for TD Bank stock, it remains the top bank stock to buy for…

Read more »

Dividend Stocks

TFSA: 3 High-Income-Yielding Stocks to Buy in February

| Jitendra Parashar

Want to buy some amazing TSX stocks for passive income from your TFSA money? Here are three high-dividend-yielding Canadian stocks…

Read more »

Dividend Stocks

The Best Stocks for Your Portfolio in 2021 and Beyond

| Kay Ng

No one can tell you what the best stocks are to buy now. You need to decide for yourself. Here's…

Read more »

Dividend Stocks

3 High-Yield Dividend Studs to Buy in February

| Andrew Button

Despite the recent market rally, you can still find plenty of high yield stocks like Enbridge Inc (TSX:ENB)(NYSE:ENB).

Read more »

Dividend Stocks

Top 2 Canadian Bank Stocks Poised to Soar in 2021

| Joey Frenette

Bank of Montreal (TSX:BMO)(NYSE:BMO) and another top Canadian bank stock that would make for great passive-income plays in 2021.

Read more »

Dividend Stocks

5 Undervalued TSX Stocks to Buy Right Now for 2021

| Sneha Nahata

The valuations of these TSX stocks are looking attractive and suggest decent upside in 2021.

Read more »

Dividend Stocks

2 Top TSX Stocks to Buy Today for Their +5% Yields!

| Chris MacDonald

Navigating the high-yield space is difficult at any point in time. With bond yields so low right now, I think…

Read more »

Bank Stocks

TFSA Investors: The 3 Best Small-Cap Stocks to Buy Right Now

| Sneha Nahata

Economic recovery and revival of consumer demand could drive these small-cap stocks higher.

Read more »

Dividend Stocks

Retirees: 3 TSX Dividend Stocks for Passive Income in 2021 and Beyond

| Kay Ng

Need more income? These dividend stocks provide passive income and protect your principal.

Read more »

Dividend Stocks

Canada Pension Plan: 1 Simple Way to Earn 42% More in Your Pension

| Christopher Liew, CFA

The CPP will increase permanently by 42% if the user starts payments at age 70. To supplement your CPP with…

Read more »

Dividend Stocks

The 2 Best Canadian Dividend Stocks to Buy Right Now

| Nicholas Dobroruka

These two dividend stocks can provide Canadian investors with a reliable passive income stream, as well as market-beating growth potential.

Read more »

Dividend Stocks

Beginner Investors: Don’t Know Where to Start? Buy These Top 2 TSX Stocks

| Chris MacDonald

These top TSX stocks are the best starting points I think any beginner investor could work with for those looking…

Read more »

Dividend Stocks

2 Safe Dividend Stocks With Yields of +5%

| Kay Ng

Need income now? Get juicy passive income from these safe dividend stocks.

Read more »

Tech Stocks

5 Best TSX Stocks to Buy Under $100 for 2021

| Sneha Nahata

These under $100 Canadian stocks are expected to deliver strong returns and outperform the broader markets in 2021.

Read more »

Bank Stocks

1 High-Growth TSX Stock to Buy Before It’s Too Late

| Nikhil Kumar

Canaccord Genuity Group Inc. (TSX:CF) is growing fast. The competitive landscape provides significant opportunity for the company in areas underserviced…

Read more »

Dividend Stocks

Stocks at a 10-30% Discount: Where to Invest $1,000 Right Now

| Sneha Nahata

As valuations aren’t appealing, buy stocks that are still trading at a discount when compared to peers.

Read more »

Dividend Stocks

CPP Pension Users: 2021 Enhancement Will Make Your Payout Bigger

| Christopher Liew, CFA

The CPP enhancement is a step in the right direction as it will increase the core guaranteed income in retirement.…

Read more »

Dividend Stocks

Buy This 1 TSX Stock if You’re Worried About the Market

| Victoria Hetherington

Boasting a comprehensive range of quality indicators, Scotiabank (TSX:BNS)(NYSE:BNS) could be the heroic stock investors need.

Read more »

Tech Stocks

TFSA Investors: The 3 Best TSX Stocks to Buy Now and Hold for the Next Decade

| Sneha Nahata

The TFSA is an ideal tool to channel investments into the largest growth stocks listed on the TSX.

Read more »

Dividend Stocks

3 Top TSX Stocks to Buy Before February!

| Chris MacDonald

I think these three top TSX stocks have the potential to outperform in February and beyond. Investors who don't buy…

Read more »

Dividend Stocks

3 Top Canadian Stocks You’ll Want to Buy in 2021

| Nicholas Dobroruka

Looking to add three top Canadian stocks to your portfolio? These three companies can provide market-beating growth, stability, and passive…

Read more »

Dividend Stocks

Hooray! The CRA Might Give You Almost $7,000 if You Have a Child in 2021

| Christopher Liew, CFA

Parents who are eligible for the CCB can receive almost $7,000 in financial support from the CRA in 2021. Canadians…

Read more »

Dividend Stocks

This Unique Bank Stock Is Long-Term Gem

| Demetris Afxentiou

Canada's big banks are some of the best investments on the market, but which one should investors choose? Here's a…

Read more »

Car, EV, electric vehicle
Tech Stocks

3 Top Auto Stocks for Tech Investors to Buy Today

| Victoria Hetherington

The auto-tech growth thesis is switching up a gear. Discover top stocks like Magna International (TSX:MG)(NYSE:MGA) today.

Read more »

Dividend Stocks

TFSA vs. RRSP: Which One Should You Choose?

| Stephanie Bedard-Chateauneuf, MBA

Choosing between a TFSA and an RRSP will essentially depends on your financial situation and your investment goals.

Read more »

Dividend Stocks

2 Useful New Tax Breaks the CRA Has Kindly Provided

| Christopher Liew, CFA

The new BPA and DNSTC are two useful tax breaks for Canadian taxpayers in 2021. To boost household income, invest…

Read more »

Dividend Stocks

3 Dividend Stocks That Can Beat the TSX in 2021

| Aditya Raghunath

Here's why value investors can look to invest in dividend stocks such as Enbridge (TSX:ENB).

Read more »

Dividend Stocks

The 2 Best Canadian Dividend Stocks to Buy Now!

| Chris MacDonald

These top dividend stocks are some of my highest-conviction Canadian picks right now!

Read more »

Dividend Stocks

CRA: 2 Massive TFSA Mistakes That Have Tax Pitfalls

| Christopher Liew, CFA

TFSA users will not pay taxes at all to the CRA if they can avoid making two costly mistakes. To…

Read more »

Dividend Stocks

2021: 3 UNDERVALUED Dividend Aristocrats to Buy Right Now

| Sneha Nahata

If you love dividends, you shouldn’t miss out on Dividend Aristocrats that are trading cheap.

Read more »

Dividend Stocks

January Stock Picks: Top 3 Dividend Stocks to Buy Under $100

| Puja Tayal

This is the right time to lock in incremental dividend income for less than $100. You can beat inflation with…

Read more »

Dividend Stocks

Bitcoin Prices: $146,000 in 2021?

| Adam Othman

Bitcoin recently started pulling through one of the worst weeks since March 2020, which scared a lot of investors into…

Read more »

Dividend Stocks

Canadian Bank Stocks: Why I’m Bullish on These Two Banks in 2021

| Nicholas Dobroruka

There are more reasons than just growth to own a Canadian bank stock. Find out why I have two Canadian…

Read more »

crashing stocks
Bank Stocks

Canadians: These 2 Stocks Could Plunge in 2021

| Joey Frenette

CIBC (TSX:CM)(NYSE:CM) and another Canadian stock that I think could be overdue for a correction at some point in the…

Read more »

Dividend Stocks

3 Tips to Retire Rich With Growth Stocks

| Kay Ng

Check out these tips that can help you retire rich with growth stocks.

Read more »

Bank Stocks

1 TSX Stock Young Investors Should Buy and Hold Forever

| Nikhil Kumar

Bank of Montreal (TSX:BMO)(NYSE:BMO) has done well in entering strategic partnerships and alliances. By serving customers better, the bank has…

Read more »

Dividend Stocks

3 Top TSX Stocks with Yields of 4% or More!

| Chris MacDonald

These 3 top TSX dividend stocks should be the cornerstones of every income portfolio!

Read more »

Bank Stocks

TFSA Stock Picks: 1 Great Buy in January 2021

| Nikhil Kumar

Exciting things are going on at Bank of Nova Scotia (TSX:BNS)(NYSE:BNS). Shareholders who buy the bank's stock could profit handsomely…

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.