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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

Bank Stocks

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| Andrew Walker

Bank of Nova Scotia stocks looks cheap right now. Is this a good time to buy or should investors wait?

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

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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

| Chris MacDonald

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Bank Stocks

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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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.

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Recent Bank Stocks News

close-up photo of investor Warren Buffett
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Warren Buffett: Bet On Yourself

| Adam Othman

Warren Buffett is quite fond of buying back Berkshire Hathaway stock. He believes it creates more value for existing shareholders…

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Dividend Stocks

This Is the 1 Bank to Buy Now

| Demetris Afxentiou

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is a great long-term investment, but here's what really makes it the bank to buy.

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Need More Income? These 3 Dividend Stocks Can Help You!

| Kay Ng

Interest rate income not enough for you? Consider these safe dividend stocks to double your income!

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2 Great Bank Stocks You Can Buy on Sale

| Sneha Nahata

The top bank stocks are available at a discount and offer high yields.

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Dividend Stocks

Stock Market Crash: 2 Top Bank Stocks Yielding Over 5.6%

| Karen Thomas, MSc, CFA

If a stock market crash is coming, get ready to load up on top bank stocks Bank of Nova Scotia…

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Bank Stocks

Ranking the Big Six Bank Stocks in September

| Ambrose O'Callaghan

Canada’s top financial institutions released Q3 earnings in August. Today, I want to rank the top bank stocks in the…

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All Big Bank Stocks Could Go Downhill Fast

| Adam Othman

You might want to avoid all the big bank stocks like the Royal Bank of Canada if you want to…

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Is it Smart to Retire on ONLY Your OAS and CPP Pension?

| Christopher Liew, CFA

Retiring with only your OAS and CPP as income sources isn’t a smart move. The smarter way is to supplement…

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Is Bank of Nova Scotia (TSX:BNS) Stock a Deal Today?

| Andrew Walker

Bank of Nova Scotia (TSX:BNS) stock trades at a huge discount to its share price at the beginning of the…

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Bank Stocks

Better Bank Stock: National Bank (TSX:NA) vs. Canadian Imperial Bank of Commerce (TSX:CM)

| Ambrose O'Callaghan

National Bank (TSX:NA) and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) recently released their Q3 earnings. Which is the better buy?

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Bank Stocks

2 Boring Value Stocks That Could Make You a Small Fortune in 10 Years

| Joey Frenette

Alimentation Couche-Tard Inc. (TSX:ATD.B) and another underrated boring stock could make you filthy rich when held over the long haul.

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TFSA Investors: A Dirt-Cheap Canadian Bank You Should Buy and Hold Forever

| Joey Frenette

Bank of Montreal (TSX:BMO)(NYSE:BMO) is a top-tier Canadian bank stock that disciplined long-term TFSA investors should load up on right…

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How Canadians Are Managing Their Money During the Pandemic

| Kay Ng

Take a look at what other Canadians are doing with their money during this pandemic and update your plan as…

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Bank Stocks

Don’t Miss This Digital Bank Stock for Growth

| Kay Ng

Thinking of buying some RBC (TSX:RY)(NYSE:RY) or TD Bank (TSX:TD)(NYSE:TD) stock? Then you should also check out this digital bank.

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Bank Stocks

Should You Buy Royal Bank of Canada (TSX:RY) Stock for Its 4.5% Dividend Yield?

| Aditya Raghunath

Royal Bank of Canada's low valuation and juicy dividend yield makes it an attractive buy for income and value investors.

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Dividend Stocks

CRA Update: $14,000 CERB Will Be Over Soon! Are You Prepared?

| Christopher Liew, CFA

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| Sneha Nahata

These wealth-building stocks have serious growth prospects.

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Warning! The CRA Can Take Back Your $14,000 CERB

| Adam Othman

Create your own cash-generating portfolio through a stock like Bank of Montreal instead of continuing to rely on government payments…

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Canada’s Stock Market Is Due for a Crash

| Ryan Vanzo

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Worried About the Stock Market Crash This Week? Here’s 1 TSX Stock to Buy

| Cindy Dye

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How to Get Your TFSA to $500,000 in 25 Years

| Adam Othman

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Bank Stocks

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| Jitendra Parashar

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2 Top TSX Stocks to Watch This Fall

| Victoria Hetherington

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3 Top Stocks to Buy Before the September Sell-Off Ends

| Joey Frenette

I'd be itching to buy Shopify Inc. (TSX:SHOP)(NYSE:SHOP) and two other top-notch TSX stocks after the latest September sell-off.

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3 Tips to Invest Like Warren Buffett in the Next Market Crash

| Kay Ng

Get rich from the next stock market crash by following these three Warren Buffett tips in investing.

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3 High-Yield Dividend Champions on Sale in September!

| Andrew Button

Dividend stocks like the Canadian Tire Corp (TSX:CTC.A) are still on sale in September.

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Top Canadian Bank Stocks: Royal Bank of Canada vs. TD Bank

| Andrew Walker

Royal Bank of Canada and TD Bank are top Canadian bank stocks with long track records of rewarding patient investors.…

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Invest Like Buffett: Buy These 2 Stocks Today

| David Jagielski

National Bank (TSX:NA) and this other stock are great buys if you're a value investor who loves dividend income.

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3 Canadian Dividend Rock Stars to Buy and Hold

| Victoria Hetherington

Find out why income names like Manulife Financial (TSX:MFC)(NYSE:MFC) are ideal for a long-term dividend stock portfolio.

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3 UNDERVALUED Canadian Gems That Are Well Placed for a Post-Pandemic Recovery

| Vineet Kulkarni

Some TSX stocks might emerge stronger in the post-pandemic world. Here are three Canadian gems for long-term investors.

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$14,000 CERB Is Ending: Start of Universal Basic Income?

| Christopher Liew, CFA

The debate on whether Canada must introduce a universal basic income after CERB and other COVID-19 aid packages will continue.…

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Bank Stocks

3 Top TSX Bank Stocks to Buy in September 2020

| Aditya Raghunath

Here's why you can look to buy stocks like the National Bank of Canada (TSX:NA) given its strong balance sheet…

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Can You Survive Solely on Your OAS and CPP Pension?

| Christopher Liew, CFA

The shocking truth about retiring is that you risk financial hardship by relying solely on your OAS and CPP. Your…

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Would a Donald Trump Re-Election Mean a Stronger Canadian Dollar?

| Adam Othman

The Toronto-Dominion stock could be in trouble, depending on the U.S. election results this November.

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September to Remember: 2 TSX Stocks I’m Hoping to Buy on a Dip

| Joey Frenette

I'll be looking to double down on Bank of Montreal (TSX:BMO)(NYSE:BMO) and another Canadian value stock on a September market…

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Dividend Stocks

Sell Royal Bank of Canada (TSX:RY) Now: Buy This Stock Instead

| Ryan Vanzo

Royal Bank of Canada (TSX:RY)(NYSE:RY) is a great stock, but if you want to grow your portfolio over the long…

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Dividend Stocks

The $2,000 CRA CERB Helped Canadians Save a Record 28%

| Christopher Liew, CFA

The record 27% savings rate due to CERB indicates that Canadians look after their financial health. You can replace CERB…

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Bank Stocks

Warren Buffett: Should You Buy Bank Stocks Right Now?

| Ambrose O'Callaghan

Canadians who want to emulate Warren Buffett’s value investing mantra should pursue stocks like Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

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Dividend Stocks

This Bank Stock Is a Better Buy Than CIBC (TSX:CM) Stock

| Stephanie Bedard-Chateauneuf, MBA

National Bank of Canada (TSX:NA) stock looks like a better buy now than CIBC (TSX:CM)(NYSE:CM) stock. The Montreal-based bank is…

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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.