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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

Is BNS Stock a Buy in January 2023?

| 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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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

Here are two top Canadian bank stocks investors may want to consider, particularly as we potentially head into a recession.

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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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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

Bank Stocks

Bank of Montreal (TSX:BMO) Earnings Report: 3 Numbers You Need to Know

| Karen Thomas, MSc, CFA

Bank of Montreal earnings disappoint as the pandemic driven economic crisis causes the possibility of significant credit losses.

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Students of Canada: Are You Eligible for $5,000 Crisis Money?

| Christopher Liew, CFA

The federal government is offering a $5,000 grant to Canadian students who will volunteer to help in the COVID-19 efforts.…

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TFSA 101: Where Should You Invest $2,000 Today?

| Andrew Walker

Here are a few tips for new TFSA investors.

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Did Warren Buffett’s Luck Finally Run Out?

| Christopher Liew, CFA

Warren Buffett is a successful investor because of his investment philosophy and not luck. He is careful in 2020 that…

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| Kay Ng

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Royal Bank of Canada’s (TSX:RY) Earnings Plunge: Is it Still a Buy?

| Matt Smith

Royal Bank of Canada's (TSX:RY)(NYSE:RY) latest results, including a sharp downturn in earnings, were expected.

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Bank Stocks

Why Bank of Nova Scotia (TSX:BNS) Stock Is Soaring 11%

| Karen Thomas, MSc, CFA

6%-yielding Bank of Nova Scotia stock rallies, as this Canadian bank's second-quarter earnings result showcases its resiliency.

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Bank Stocks

Why Scotiabank (TSX:BNS) Stock Surged After Earnings

| Ambrose O'Callaghan

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) released a brutal Q2 2020 earnings report on May 26, but shares of Scotiabank still…

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Bank Stocks

CRA WARNING: Watch Out for These Pandemic Scams

| Amy Legate-Wolfe

For those that need CRA benefits during the pandemic, make sure to watch for scams, and consider investing in cheap…

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Warning: Is This Your Last Chance to Buy Canadian Banks for Cheap?

| Joey Frenette

Scotiabank (TSX:BNS)(NYSE:BNS) and National Bank of Canada (TSX:NA) delivered better-than-feared results that could spark a massive Canadian bank rally.

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TFSA Investing: Turn $69,500 Into $1,000,000!

| Jared Seguin

For those looking at long-term TFSA investing, this blue-chip TSX stock could be the key to building a million-dollar portfolio…

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Will Scotiabank (TSX:BNS) Cut its Dividend?

| Matt Smith

Bank stocks are under pressure, and Scotiabank's (TSX:BNS)(NYSE:BNS) earnings plunge because of the coronavirus pandemic.

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What Warren Buffett’s Recent Stock Sales Say About TSX Banks

| Daniel Da Costa

Warren Buffett recently reduced several of his investments in banks. Here's what that could mean for TSX bank stocks going…

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TFSA Investors: How to Earn $410 in Monthly Income and Pay Zero Taxes to the CRA

| Aditya Raghunath

Here's how you can supplement your income by investing in dividend stocks such as CIBC.

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Canada Revenue Agency: 2 Major COVID-19 Tax Breaks You Might Get

| Adam Othman

The Royal Bank of Canada might be an ideal stock to buy from your tax savings through these two tax…

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$2,000 Invested in These 3 TSX Stocks Could Make You a Fortune in 10 Years

| Kay Ng

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Got $5,000? Now Is the Time to Invest in This Bank Stock

| Nicholas Dobroruka

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ALERT: Canadian Banks Earnings Loom: Buy the Dip or Jump Ship?

| Joey Frenette

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| Aditya Raghunath

Index investing is a sure-shot way of building long-term wealth for Canadians with a low-risk appetite.

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| Christopher Liew, CFA

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Want Decades of Growth? Bank on This Stock

| Demetris Afxentiou

Prospective investors should look here for a long-term investment option that can offer decades of growth and income-earning potential.

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Top TSX Financial Stocks for June 2020

| Motley Fool Staff

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| Andrew Walker

There are still cheap TSX Index stocks for value investors to buy today.

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| Adam Othman

With the COVID-19 pandemic causing Canadian Dividend Aristocrats to lose their streaks, the National Bank of Canada and Bank of…

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Bank Stocks

Will Canadian Banks Push the TSX Index Lower?

| Vineet Kulkarni

Canadian banks form a major portion of the TSX Index. Weaker quarterly earnings could push them lower, ultimately dominating the…

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Buy And Hold This 1 High-Yield Dividend Stock for at Least 10 Years

| Adam Othman

The Canadian Imperial Bank of Commerce could be an excellent buy at its current price as a forever stock.

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Should You Buy CIBC (TSX:CM) Stock for the 7% Dividend Yield?

| Andrew Walker

CIBC (TSX:CM)(NYSE:CM) now offers a 7% dividend yield. Is the payout safe?

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CRA: High Debt Levels Are Weighing on Economies

| Kay Ng

How are the high debt levels around the world going to get paid? What can you do to protect you…

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Market Crash: Turn $60,000 Into $1 Million Right Now

| Amy Legate-Wolfe

There's a strong opportunity to buy up bank stocks during this market crash, and this one provides the best chance…

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Which Stocks Should You Buy for a TFSA Right Now?

| Victoria Hetherington

Banks like Scotiabank (TSX:BNS)(NYSE:BNS) are strong additions to a long-term TFSA. But is there a sector to avoid right now?

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Where Should You Be Parking Extra Cash This Year: TFSA or RRSP?

| Kyle Walton

The two primary types of tax-free investment vehicles in Canada have significant differences that could have an impact on you…

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Investing $25,000 in This 1 Safe Stock Can Earn You $1,800 in Dividends Every Year

| David Jagielski

Why now could be a great time to buy shares of Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

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CPP Pension and OAS: Why $1,286.40/Month Just Isn’t Enough

| Christopher Liew, CFA

The best way to fortify your retirement security is to save and invest in income-generating assets like the Bank of…

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Canada’s Big Banks: Stocks Earnings Preview

| Mat Litalien, MBA

All of five Canada's big bank stocks are scheduled to report results this coming week. They will be closely watched…

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Has the Warren Buffett of Canada Lost His Touch?

| Ryan Vanzo

Fairfax Financial Holdings (TSX:FFH) is led by Prem Watsa, the Warren Buffett of Canada. What's wrong with the stock price…

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Warren Buffett: The Journey From Buying to Selling

| Adam Othman

In the first quarter of this year, Warren Buffett has spent more time selling his stake in losing businesses than…

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TFSA Retirement Fund: Is This the Right Time to Buy TD (TSX:TD)?

| Haris Anwar

TD (TSX:TD)(NYSE:TD) stock looks attractive after this year's pullback, but a deepening economic crisis is keeping investors on the sidelines.

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Dividend Stocks

Dividend Investing: 2 TSX Stocks to Buy

| Jared Seguin

While stocks are still hurting, opportunities are abound for dividend investing. Find out which top TSX stocks are paying handsome…

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2 Strong TSX Stocks for Super Long-Term Investing

| Victoria Hetherington

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and one other stock are likely to provide steady wealth creation for years to come.

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Ready to Retire? Do This 3-Step To-Do List to Make Sure

| Christopher Liew, CFA

You will have the confidence to retire and look forward to retirement by following three simple steps. The most crucial…

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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.