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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

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

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| Andrew Button

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| Chris MacDonald

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| Brian Paradza, CFA

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| 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

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CRA Benefits Coming in August: 3 Smart Stocks to Buy Next Month With an Extra $200

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There are two monthly CRA benefits you might be receiving in August and three great stocks to consider buying with…

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Got $3,000 to Invest But Worried About Low Interest Rates? Here’s How to Squeeze High Yields

| Sneha Nahata

Invest in these stocks to generate high yields amid low interest rate environment.

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Got Savings? Then You Need to Know These 3 CRA Tax Breaks

| Andrew Button

You get a big tax break if you hold stocks like the Royal Bank of Canada (TSX:RY)(NYSE:RY) in a TFSA.

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Investors: This Top TSX Stock Is a Screaming Buy Today!

| Aditya Raghunath

Hre's why goeasy remains a top buy, despite a 150% gain since March 2020

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| Andrew Walker

How to receive $2,350 per month tax-free after CERB ends.

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2020 Market Crash: A Generational Opportunity to Buy These Dividend Stocks

| Joey Frenette

Consider TC Energy (TSX:TRP)(NYSE:TRP) and another catch-up trade if you're like Warren Buffett and didn't buy much amid the 2020…

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Warren Buffett Is Betting on Banks: Should You Buy RBC (TSX:RY)?

| Adam Othman

Consider buying the Royal Bank of Canada stock, as Warren Buffett takes on a bullish position in the banking sector.

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62% of Laid-Off Canadians Prefer CRA CERB to Working

| Christopher Liew, CFA

CERB needs fine-tuning, because laid-off Canadians can earn more without working. But for those seeking alternative but permanent income streams,…

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The advice of current retirees to future retirees is to get real, because the OAS and CPP are insufficient. You…

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close-up photo of investor Warren Buffett
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Warren Buffett Bought Almost $1 Billion in Bank Stocks: Should You?

| Adam Othman

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CRA Crisis Announcement: Canada Revenue Agency Extends Tax Payment Deadline Again

| Aditya Raghunath

The Canada Revenue Agency has delayed the tax payment deadline to September 30, 2020.

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Comparing Canada’s 2 Top Banks

| Jed Lloren

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Bank Stocks

Bank of Montreal (TSX:BMO) Report: Here’s Where the Economy Is Headed

| Ryan Vanzo

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Buying TSX Bank Stocks? Wait for This 1 Thing

| Victoria Hetherington

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| Andrew Walker

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| Andrew Button

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RRSP Investors: Should You Buy National Bank (TSX:NA) or Bank of Montreal (TSX:BMO)?

| Ambrose O'Callaghan

RRSP investors may want to consider undervalued bank stocks like National Bank (TSX:NA) and Bank of Montreal (TSX:BMO)(NYSE:BMO) in late…

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2 Top Bank Stocks to Buy Right Now

| Adam Othman

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| Christopher Liew, CFA

Believe or not, you can increase CPP pension by 42% in one easy way. But to ensure your financial health…

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| Kyle Walton

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How to Make Your CRA CERB Money Last Longer

| Kay Ng

Get big income from these solid dividend stocks now to make your CERB money and savings last longer.

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Canada Revenue Agency: How to Get $1,200 Per Month After CERB Ends

| Andrew Walker

CERB payments from the Canada Revenue Agency are set to end in September. Now what?

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| Adam Othman

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CRA Tax Savers: 3 Uncommon Tax Credits You Can Claim

| Christopher Liew, CFA

You can derive significant tax savings while conducting business at home. The uncommon tax credits and investment income from the…

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This $770 Million Growth Stock Could Rise 40%

| Ryan Vanzo

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3 High-Yield Dividend Stocks to Buy on Sale

| Sneha Nahata

These TSX stocks offer incredible yields that are safe.

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This Bank Stock With a 6.2% Yield Is a Screaming Buy

| Ambrose O'Callaghan

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is a bank stock that I like in late July for its value and…

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2 Canadian Stocks That Could Be Worth $200 Billion in No Time

| Sneha Nahata

These Canadian companies have proved they can stand the test of time.

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Warren Buffett Bets $800 Million on Bank Stocks: Should You Follow Suit?

| Andrew Button

Warren Buffett is betting big on bank stocks. Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is similar to the ones he's buying.

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DIVIDEND ALERT! 3 of Canada’s Biggest Banks Pay Dividends This Week

| Kyle Walton

Three of Canada's Big Five banks are putting money in the pockets of shareholders this week. Will you be receiving…

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Income Investors: Are Canadian Bank Stocks a Buy Amid the Crisis?

| Joey Frenette

Bank of Montreal (TSX:BMO)(NYSE:BMO) and the Canadian banks look dirt-cheap on a price-to-earnings basis, but why aren't investors piling in?

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Got $10,000? Buy Top Dividend Stocks That Are Selling Cheap

| Haris Anwar

Buying top dividend stocks early and holding them in your portfolio over the long run is a great way to…

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1 Stable Stock Due for Explosive Gains

| Amy Legate-Wolfe

There are a number of stocks due for a boost, but not all of them are safe bets. But this…

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TSX Earnings: 3 Quotes You Should Hear

| Debra Ray

Loblaw Companies Limited (TSX:L) had great news to report during earnings last week, but did these other two stocks have…

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Forget Berkshire Hathaway: Buy This Stock Instead

| Ryan Vanzo

Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) has been a terrific investment, but there's a similar company trading at a much bigger discount.

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My Big Five Bank for the Rest of 2020

| Demetris Afxentiou

Canada's Big Five banks offer some of the best growth and income-earning capabilities on the market. Here's the one bank…

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Applied for the CERB? Get Ready for Big Delays

| Andrew Button

Thanks to anti-fraud checks, the CERB is being delayed. The Toronto-Dominion Bank (TSX:TD)(NYSE:TD) customers face a similar reality.

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Retirees: Did You Miss Your Chance for a $500 OAS and GIS Boost?

| Christopher Liew, CFA

Millions of Canadian seniors are receiving a one-time boost of up to $500 in OAS and GIS payments. Some retirees…

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CRA Emergency Measures: $19 Billion More

| Adam Othman

After massive aid projects like CEWS and CERB, the federal government is funneling $19 billion more towards provinces to help…

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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.