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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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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

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You could become a TFSA millionaire in a reasonable period of time by investing in blue-chip stocks like Royal bank…

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| Aditya Raghunath

Here's why TFSA investors should invest in dividend stocks such as TC Energy.

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TFSA Investors: Here’s How You Can Safely Secure a 7% Dividend Yield

| David Jagielski

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a solid dividend stock that investors can hold in their portfolios for decades.

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Yes, You Should Brace for a Second Market Crash

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The market is not stable as it appears today. Market analysts see a brewing storm that could lead to a…

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Retiring at age 60 and claiming your CPP pension allows for more enjoyable years. Life will also be comfortable if…

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TFSA Investors: Why You’d Be Smart to Buy This Top Dividend Stock Now

| Haris Anwar

Here is what makes Toronto-Dominion Bank (TSX:TD)(NYSE:TD) a top candidate for your TFSA portfolio.

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Don’t Lie About the $8,000 CERB: You Could Land in Jail

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| Sneha Nahata

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Which Canadian Bank Stock Is the Most Undervalued?

| Joey Frenette

TD Bank (TSX:TD)(NYSE:TD) is a dirt-cheap Canadian bank stock that TFSA income investors should consider loading up on right now.

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Jobs Down, Stocks Up: Is the Market Being Irrational?

| Andrew Button

Despite GDP and other economic indicators falling, stocks like the Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) are rising.

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TFSA Investors: 3 Super Bank Dividend Stocks to Buy Today

| Ambrose O'Callaghan

High-yield bank dividend stocks like Canadian Western Bank (TSX:CWB) are the perfect stash in a TFSA to start the summer.

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Bet on this beaten-down financial services companies for stellar long-term growth.

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Better Bank Stock: Scotiabank (TSX:BNS) or Bank of Montreal (TSX:BMO)?

| Ambrose O'Callaghan

Investors may be mulling over top bank stocks like Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and Bank of Montreal (TSX:BMO)(NYSE:BMO) this…

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Bank of Nova Scotia (TSX:BNS): Should You Buy the Stock if the Market Crashes Again?

| Andrew Walker

Bank of Nova Scotia pays a great dividend and offers strong long-term growth potential, but near-term risks can't be ignored.…

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Don’t Even Think About Retiring on ONLY Your OAS and CPP Pension

| Christopher Liew, CFA

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Bank of Montreal (TSX:BMO)(NYSE:BMO) is one of many dirt-cheap TSX stocks that value investors should seek to buy right now.

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Retirees: Create Your Own Pension With These 3 Investments

| Aditya Raghunath

Retirees can look to buy CPP-backed stocks such as CNQ and BNS to supplement their pension payouts.

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TD Bank (TSX:TD): You Won’t Believe How Good This Dividend Stock Has Been

| Nelson Smith

You won't believe how well an investment made in TD Bank (TSX:TD)(NYSE:TD) 20 years ago has worked out today. But…

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Attention Investors: Canadian Imperial Bank of Commerce (TSX:CM) Is Yielding Over 6%!

| Karen Thomas, MSc, CFA

Canadian Imperial Bank of Commerce is the bank stock that has the highest dividend yield, with a strong well-capitalized balance…

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| Kay Ng

Get a unique gift for your dad this Father’s Day so that he can buy what he wants with some…

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Collecting CERB? The CRA Says 190,000 Canadians Are Making This Mistake!

| David Jagielski

One thing that's not a mistake is investing in a top bank stock like Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

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TFSA Investors: It’s the Best Time to Build a Tax-Free Dividend Portfolio!

| Kay Ng

Increase your tax-free income now by investing in these cheap TSX dividend stocks in your TFSA!

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Investors: 3 Boring Stocks That Can Make You Rich

| Nelson Smith

It won't be an exciting journey, but boring stocks like Fortis (TSX:FTS)(NYSE:FTS), TC Energy (TSX:TRP)(NYSE:TRP) and National Bank of Canada…

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Can You Retire on a $250,000 Dividend Portfolio?

| Kay Ng

How much income can you generate from a $250,000 dividend portfolio? What are the risks of maximizing your dividend income?

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Will the Stock Market Crash Again?

| Kay Ng

A stock market crash may be looming on the horizon. Here’s how you can prepare by selling three types of…

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TD Bank (TSX:TD): An Oversold Dividend Stock to Stash in a TFSA Today

| Joey Frenette

TD Bank (TSX:TD)(NYSE:TD) is one of many dirt-cheap dividend stocks that TFSA investors should buy now, rather than waiting for…

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Ready to Retire? If You Can’t Answer These 3 Questions, You’re Not

| Christopher Liew, CFA

Retirement planning is the same, even in a pandemic, although the key is to ensure that your plan uses the…

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How Much CPP Pension Will You Receive When You Retire?

| Christopher Liew, CFA

The CPP pension is insufficient, because not everyone gets to receive the maximum payout. Retirees need other sources of income…

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Got $5,000? Buy These 3 TSX Stocks Now

| Amy Legate-Wolfe

You may have missed out on the market crash, but that doesn't mean you should pass up on the opportunity…

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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.