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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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The 1 TSX Stock I’d Go All-In On

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Recent Bank Stocks News

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| Andrew Walker

There are still great dividend deals in the market today.

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Bank Stocks

Investor Alert: This Bank Stock Is Trading Below Book Value!

| Karen Thomas, MSc, CFA

Bank of Montreal stock is a quality bank stock that is trading below book value, and that offers investors a…

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Why Did Fairfax (TSX:FFH) Stock Skyrocket 38%?

| Ryan Vanzo

Fairfax Financial (TSX:FFH) is run by famed investor Prem Watsa. This stock is a long-term winner, but recent results have…

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| Jared Seguin

If you're looking at long-term dividend investing, these four stocks could be great choices. Find out which ones are offering…

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Should You Buy Royal Bank (TSX:RY) or CN (TSX:CNR) Stock?

| Andrew Walker

Royal Bank (TSX:RY) and CN (TSX:CNR) are two of Canada's largest companies. Is one a better but right now for…

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| Haris Anwar

A possible crash in the Canadian housing market remains a trendy topic. Is this finally upon us after the pandemic-induced…

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Buy Alert: TD Bank (TSX:TD) Stock Just Popped 25%

| Aditya Raghunath

Here's why investors should keep TD Bank (TSX:TD) stock on their watchlist.

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2 Heavily Discounted Dividend Kings To Buy and Hold Forever

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| Amy Legate-Wolfe

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| Adam Othman

The CMHC predicts that home prices may fall by almost a fifth of their amount today, so you might want…

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Dividend Investors: Should You Buy Bank of Nova Scotia (TSX:BNS) or Bank of Montreal (TSX:BMO) Stock?

| Andrew Walker

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and Bank of Montreal (TSX:BMO)(NYSE:BMO) offer attractive yields today. Is one stock a better buy?

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A Tale of 2 Banks: Which Is the Better Buy?

| Jed Lloren

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Buy Alert: 2 Canadian Bank Stocks With 6% Yields

| Kris Knutson

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| Nelson Smith

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10 Financial Stocks That Raised Dividends in Q1

| Mat Litalien, MBA

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| Nicholas Dobroruka

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Why Bank of Nova Scotia (TSX:BNS) Is the Best Canadian Bank to Buy

| Jed Lloren

Retail investors generally prefer to invest in the Royal Bank of Canada and TD Bank. Why should you consider the…

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| Kay Ng

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TD Bank (TSX:TD) Stock: Buy, Sell, or Hold?

| Andrew Button

Trading at a historically cheap valuation, Toronto-Dominion Bank (TSX:TD)(NYSE:TD) may look like a buy. But is it?

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| Andrew Walker

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Now Is the Time to Buy Scotiabank (TSX:BNS)

| Matt Smith

After declining by over 20% since the start of 2020 Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) appears extremely attractively valued, making…

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2 Awesome TSX Stocks Too Cheap to Ignore!

| Aditya Raghunath

The bear market has driven stocks such as TD Bank (TSX:TD) and Emera lower in 2020, making them attractive to…

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| Christopher Liew, CFA

Retirees are realizing that relying on only the CPP pension is not advisable. You need to supplement it with income-producing…

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BUY ALERT: 2 Dirt-Cheap Bank Stocks Yielding up to 6.2%

| Ambrose O'Callaghan

Canadian investors should target discounted bank stocks like Bank of Montreal (TSX:BMO)(NYSE:BMO) as volatility returns to the market.

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3 High-Yield Options for Income Investors

| Chris MacDonald

Investors looking for high-yield investments, look no further. My top three picks are Brookfield Infrastructure Partners (TSX:BIP.UN)(NYSE:BIP), Royal Bank of…

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Is the Window to Buy Toronto-Dominion Bank (TSX:TD) Closing?

| Kris Knutson

Canadian banks have been low for months, but they are beginning to move higher. Is there still time to add…

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Seniors: Not Eligible for CERB? You May Have $500 in Tax-Free Income Headed Your Way

| David Jagielski

If you've received a payment from the government, you should consider investing it in Royal Bank of Canada (TSX:RY)(NYSE:RY) to help…

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3 Top TSX Stocks That Will Make You Richer in 2020 (and Beyond)

| Kay Ng

Looking to make a nice fortune on a market pullback? Start your research with these solid dividend stocks available on…

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Bank Stocks

Canada’s Banks Made History: What’s Next?

| Chris MacDonald

What is the future of Canada's banks, including smaller banks like Laurentian Bank (TSX:LB) and National Bank (TSX:NA)?

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Dividend Stocks

The CRA Deserves a Round of Applause for These 2 Crisis Payouts

| Christopher Liew, CFA

The CRA is doing a splendid job in administering the CERB and CESB for workers and students, respectively. Recipients in…

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Dividend Stocks

Market Crash: Should You Buy Royal Bank (TSX:RY) or Enbridge (TSX:ENB) Stock?

| Andrew Walker

Royal Bank (TSX:RY) and Enbridge (TSX:ENB) are giving back some of their recent gains. Is one stock a better buy…

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Dividend Stocks

CRA CERB Final Stage: Your $2,000 Is Almost Out of Time

| Christopher Liew, CFA

The CERB payments are winding down soon in case eligible recipients are unaware. Apply now so you can receive $2,000…

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Bank Stocks

ALERT: Laurentian Bank Is Still Not a Buy, Even at This Attractive Valuation

| Nicholas Dobroruka

Even with a recent dividend cut, this 5% yield and attractive valuation may tempt investors in buying shares. Here’s why…

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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.