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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 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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| Sneha Nahata

Investing in these TSX stocks could multiply your wealth over the long run.

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Value Investors: These 2 TSX Stocks Are Absurdly Cheap Right Now

| Aditya Raghunath

Value investors can look to buy blue-chip heavyweights like Suncor (TSX:SU) and Bank of Nova Scotia (TSX:BNS) for dividend and…

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| Christopher Liew, CFA

A well-funded nest egg is what gives retirees the confidence to retire at 65 or earlier at 60. CPP users…

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Stock Market Genius Warns: Don’t Buy Canadian Bank Stocks!

| Ryan Vanzo

Learn why you should stay away from Canadian bank stocks like Royal Bank of Canada (TSX:RY)(NYSE:RY) and Laurentian Bank of Canada (TSX:LB).

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Turn Your $100 Weekly Savings Into $332,000 and Earn Passive Income, Too

| Sneha Nahata

A small weekly savings of $100 can go a long way.

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While the stock market remains unsettled, some income investing options are attractive. These are two you should watch today.

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| Haris Anwar

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| Jed Lloren

The moat that Canadian telecom companies have rivals that of the top five Canadian banks. Which telecom company should you…

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| Amy Legate-Wolfe

CERB has been heralded as a win for Canada, but changes put the cash Canadians counted on at risk. It's…

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A housing crash before 2021 is not entirely unlikely, and investors with shares of banking stocks like Royal Bank of…

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| Christopher Liew, CFA

The slow but painful recovery of Canada is starting. Economists see the economy contracting in 2020 before rebounding by 5.5%…

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$2,000 CERB or EI: Which Should You Choose?

| Christopher Liew, CFA

No one gets more from either CERB or EI during the 2020 pandemic. However, the Toronto Dominion Bank stock can…

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Canada Revenue Agency: How to Get $2,000 per Month Tax-Free in Retirement

| Andrew Walker

How to create your own tax-free pension to supplement CPP and OAS pensions.

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TFSA Investors: Where to Invest $6,000 Right Now

| Vineet Kulkarni

TFSA investors: High-quality TSX stocks that pay stable dividends will likely outperform broader markets in the long term.

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| Nicholas Dobroruka

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| Kay Ng

Are you getting CRA benefits, but they’re not enough? Increase your income in a flash by doing this!

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| Sneha Nahata

Even a small investment of $400 GST credit can go a long way.

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| Debra Ray

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Should You Buy Royal Bank of Canada (TSX:RY) Stock After BoA’s Earnings?

| Andrew Button

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| Puja Tayal

When you plan your investments, also consider the tax component. You can leverage the different tax treatment of RRSP and…

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| Debra Ray

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| Vineet Kulkarni

Consider these top TSX stocks to generate a passive-income stream with dividends and slow stock movements for stability.

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| Debra Ray

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RRSP Investors: Should Nutrien (TSX:NTR) or TD (TSX:TD) Stock Be on Your Buy List?

| Andrew Walker

Nutrien (TSX:NTR)(NYSE:NTR) and TD (TSX:TD)(NYSE:TD) offer attractive 5% dividend yields today. Is one stock a better RRSP bet right now?

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Beyond CRA’s CERB: It’s Time to Explore New Avenues to Bridge the Income Gap

| Sneha Nahata

Invest in new avenues for steady and passive income, as the CERB will end soon.

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Here’s Why You Can’t Live on ONLY the OAS and CPP

| Christopher Liew, CFA

Financial security, not age, is the bigger concern of prospective retirees. If the OAS and CPP aren’t enough, the recourse…

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| Kay Ng

Have you experienced dividend cuts this year? Are you taking too many risks? Here's how to build a dividend stock…

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Should You Buy CIBC (TSX:CM) Stock Right Now for the 6.25% Dividend Yield?

| Andrew Walker

CIBC (TSX:CM)(NYSE:CM) now offers a 6.25% dividend yield. Is this the right time to buy the stock?

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Want a Safe Dividend Stock That Pays 9%? Here’s How to Get It

| David Jagielski

Investing in Bank of Novia Scotia (TSX:BNS)(NYSE:BNS) can be a great way to generate recurring income for your portfolio for many…

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Does a 50% Stock 50% Bond Portfolio Still Make Sense?

| Kay Ng

Is your investment portfolio allocation meeting your financial needs? Do you need more income or growth? You can find both…

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$2,000 CERB: Do This 3-Step Checklist to Make Sure the CRA Won’t Take it Away

| Christopher Liew, CFA

The CRA is taking back erroneous CERB payments from ineligible recipients. Some Canadians are investing in the Toronto Dominion Bank…

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$500 GIS and OAS Special Boost: Everything You Need to Know Is Here

| Christopher Liew, CFA

Thanks to the GIS and OAS special boost, Canadian seniors could receive up to $500 pandemic money. Retirees wishing a…

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Dividend Investing: 2 Stocks to Buy and Hold

| Jared Seguin

With the market remaining unsettled, dividend investing can still bear fruits over the long run. These two stocks are perfect…

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3 Top Stocks That Will Soar Out of This Pandemic

| Robin Brown

Despite significant stock market volatility, these three top stocks are set for major growth from a recovery out of the…

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Bank Stocks

WARNING: Are Bank Stocks Discounted or Dangerous?

| Ambrose O'Callaghan

Bank stocks like Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) have rebounded, but there are still many risks for this bank…

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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.