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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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| Andrew Button

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2 Bank Stocks to Load Up on in a Recession

| Chris MacDonald

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Better Buy: RBC Stock or the Entire TSX?

| 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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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.

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Recent Bank Stocks News

Bank Stocks

Got $3,000? Here Are My Top 3 Canadian Bank Stocks

| Ambrose O'Callaghan

Canadian investors with some cash to use in October should look to top bank stocks like National Bank (TSX:NA) and…

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Why Dividend Stocks Belong in Every Retirement Plan

| David Jagielski

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a safe income-generating investment that you can hold in your portfolio forever.

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Bank Stocks Are Down 15% Year to Date: Why I’m Still Bullish

| Nicholas Dobroruka

Forget high-flying tech stocks. Bank stocks are what I’m adding to my watchlist for the rest of this year.

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CIBC (TSX:CM): A Screaming Buy for its Cheap 5.8% Yield?

| Joey Frenette

CIBC (TSX:CM)(NYSE:CM) is back, with a premium multiple and a lofty 5.8% dividend yield, but should you bite on shares…

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| Christopher Liew, CFA

CERB is over and the transition to EI is underway. Canadians shouldn’t worry about applying because the system is simplified.…

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Why Dividend Income Is Better Than CRB’s $500 a Week

| Kay Ng

It’s helpful to collect CRB payments, but you can benefit even more from generating dividend income.

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| Jared Seguin

Looking to add to a long-term TFSA investing strategy? Make sure to consider these three TSX stars with big yields…

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3 Dividend Stocks for Yield-Starved Investors at a 15-30% Discount

| Sneha Nahata

The stocks offer fat dividend yields and are available at a good discount.

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2 TSX Stocks I’d Buy Before Investing in Air Canada (TSX:AC)

| Nicholas Dobroruka

Find out why I’m a total bear on Canada’s largest airline. I’d much rather own these two top TSX stocks…

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New $13,000 CRB: Are You Eligible?

| Christopher Liew, CFA

Find out if you’re eligible to receive the $13,000 CRB. The CRA window is now open to receive applications. Look…

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| Christopher Liew, CFA

Failing health and pressing financial needs are the reasons why a CPP user will not wait until 70 to collect…

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Why TD Bank (TSX:TD) Stock Just Plunged 5%

| Joey Frenette

TD Bank (TSX:TD)(NYSE:TD) is under pressure following recent downgrades by sell-side analysts, making the name a solid buy on the…

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3 Canadian Stocks That Could Set You Up for Life

| Nicholas Dobroruka

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3 Top TSX Value Stocks to Buy in October 2020

| Debra Ray

Now is the perfect time to buy top Canadian value stocks like Emera Incorporated (TSX:EMA) on the Toronto Stock Exchange,…

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The Canadian Housing Market Crash Could Be a Nightmare for Investors: Here’s What You Can Do Right Now

| Jitendra Parashar

We might have to wait for a couple of quarters more to assess coronavirus' real damage to the housing market,…

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TD Bank (TSX:TD) Stock Could Crash if Trump Isn’t President

| Adam Othman

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3 Top TSX Income Stocks to Buy in October 2020

| Debra Ray

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How to Turn Your CERB Extension Into a Lasting Income Stream!

| Aditya Raghunath

You can create a passive income stream by investing in high-yield dividend stocks like Bank of Nova Scotia (TSX:BNS).

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3 Top TSX Dividend Stocks to Buy in October 2020

| Debra Ray

Financial stocks are leading markets higher, and now might be the perfect time to buy high dividend payers like the…

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| Victoria Hetherington

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Buy Bank of Nova Scotia (TSX:BNS) Right Now

| Demetris Afxentiou

Canada's big banks make great investment options in any market, but right now investors should look to buy Bank of…

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| Sneha Nahata

The high dividend yields of these TSX stocks are sustainable in the coming years.

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| Christopher Liew, CFA

About 50% of Canadians are in danger retiring poor, because of the complex financial challenges brought by the 2020 pandemic.…

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Here’s Why Bank of Montreal (TSX:BMO) Stock Isn’t a Good Buy Right Now

| Jitendra Parashar

Bank of Montreal (TSX:BMO)(NYSE:BMO) stock rose sharply last week after falling for the previous five consecutive weeks. Let’s find out…

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Should You Buy CIBC (TSX:CM) Stock for the 5.86% Dividend?

| Amy Legate-Wolfe

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) has the highest dividend of the Big Six Banks, but is that enough?

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Don’t Want to Pay Taxes? Try These 3 Little-Known Tax Deductions

| Christopher Liew, CFA

Knowing the little-known tax deductions can help taxpayers boost tax savings. To generate tax-free earnings, invest in the National Bank…

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If I Could Only Own 3 Stocks, It Would Be These Ones

| Adam Othman

Diversification is essential, but if it weren't a viable option, investors would stick with companies they believe in and understand.

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Top Recovery Bets: Where to Invest $10,000 Now

| Sneha Nahata

The pickup in economic activities could fuel the recovery in these fundamentally strong stocks.

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Canada Housing Market Crash Is for Real: How Could It Affect You?

| Jitendra Parashar

The Canada Mortgage and Housing Corporation's latest report says that Canada’s housing market is vulnerable -- mainly due to overvaluation…

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Now Is the Best Time to Buy Bank Stocks

| Sneha Nahata

With the recovery in economic activity, Canadian bank stocks could deliver superior growth.

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44% of Canadians Say a Housing Crash Won’t Happen

| Christopher Liew, CFA

The sentiment of Canadians differs from CHMC’s position regarding a housing market crash. Analysts are also predicting a TSX crash,…

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2 Canadian Bank Stocks to Bank on Before the Next Bull Market

| Joey Frenette

Bank of Montreal (TSX:BMO)(NYSE:BMO) and another Canadian bank that investors should seek to load up on while they're still cheap.

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CRA Update: New Canada Recovery Benefit (CRB) Helps You Transition From CERB

| Cindy Dye

The CRB provides income support to employed and self-employed individuals who are directly affected by COVID-19 and are not entitled…

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TFSA Users: $10,000 in Each of These 3 Stocks Pays You $2,032/Year

| Sneha Nahata

These TSX stocks generate solid monthly or quarterly income that could grow with you.

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TFSA Investing: 2 Dividend Superstars to Watch

| Jared Seguin

If you're looking to add to a TFSA investing plan, be sure to give these stocks a look. They offer…

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Expect a Trump Win? Buy These 3 TSX Stocks

| Victoria Hetherington

Find out why Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) could improve this November, plus two more stocks to buy this fall.

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CPP Pension and OAS Payments: Not Enough to Live on

| Christopher Liew, CFA

Would-be retirees should prioritize retirement savings to supplement the inadequacy of the CPP and OAS. The Bank of Nova Scotia…

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Dividend Stocks

2 Dividend Heavyweights That Could Pop Once Value Becomes Great Again

| Joey Frenette

Intact Financial Corp. (TSX:IFC) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are two dividend heavyweights that are too cheap to pass up…

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Bank Stocks

3 Canadian Stocks to Buy and Hold for the Next Decade

| Nicholas Dobroruka

Looking for stocks that can outperform the Canadian market? Here are three companies that have the potential to do exactly…

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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.