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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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Recent Bank Stocks News

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TFSA Investing: Should You Buy TD (TSX:TD) Stock Today?

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Market Crash 2020: Will Royal Bank of Canada Stock Move Lower?

| Aditya Raghunath

Royal Bank of Canada (TSX:RY)(NYSE:RY) stock remains a compelling buy for long-term income investors who seek large but safe dividends.

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The stock market is acting strangely in the pandemic. However, making a fortune with measly capital is possible with the…

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Royal Bank of Canada (TSX:RY) Just Became a Must-Buy on the Dip

| Joey Frenette

Royal Bank of Canada (TSX:RY)(NYSE:RY) is a compelling buy for long-term income investors who seek large, but safe dividends.

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Market Crash: Another Chance to Buy Royal Bank of Canada (TSX:RY) Stock

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You should buy Cargojet (TSX:CJT) stock to profit from quick e-commerce trends rather than Shopify (TSX:SHOP)(NYSE:SHOP).

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Should You Buy Royal Bank of Canada (TSX:RY) Stock Now?

| Andrew Walker

Royal Bank of Canada (TSX:RY) appears cheap today. Is this the right time to buy the stock?

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4 Top Canadian Bank Stocks for Dividend Investors

| Victoria Hetherington

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Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a bargain today and investors who wait could miss out on an amazing opportunity.

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Top Dividend Stocks to Buy on the TSX Index

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

| Andrew Walker

Income investors can secure great yields on top dividend stocks today. Is this the time to buy?

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| Andrew Button

According to new research, Canadians prefer "safe" investments like the BMO Mid-Cap U.S. Investment Grade Corporate Bond Index ETF (TSX:ZIC).

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Bank of Montreal (TSX:BMO): A Top Bank With Massive Upside

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| Mat Litalien, MBA

Top growth stocks like goeasy (TSX:GSY) are strong buy candidates, as they are also trading at big discounts to historical…

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| Jared Seguin

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There are a lot of top stocks at a discount right now, but if you're a millennial looking to buy…

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These 2 Dividend Aristocrats are Dirt-Cheap Right Now

| Adam Othman

It could be an ideal time to pick up shares of the Royal Bank and BCE right now.

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CRA Alert: Ignore the Deadline Change

| Amy Legate-Wolfe

The CRA gave Canadians until June 1, 2020 to file tax returns, but here's why you don't have to -…

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TFSA Users: 2 Insanely Cheap Stocks to Load Up on

| Christopher Liew, CFA

The 2020 market crash is harsh. However, TFSA users can load up on cheap dividend payers like the National Bank…

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Hate Taxes? The CRA Says Don’t Pay Them Until Later

| Christopher Liew, CFA

Canadian taxpayers are relieved with the CRA is moving the tax-filing and tax-payment deadlines to a later date. TFSA users…

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If You Don’t Buy Royal Bank (TSX:RY) Stock Today, You’ll Kick Yourself Later

| Nelson Smith

With shares down some 20% compared to a few months ago, it's time to start buying Royal Bank (TSX:RY)(NYSE:RY) stock.…

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Dividend Stocks

TFSA Investors: Make More Than $1,800 in Tax-Free Dividends by Investing in This 1 Stock

| David Jagielski

Dividend investors looking for a great yield should look no further than Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) stock.

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Dividend Stocks

Toronto-Dominion Bank (TSX:TD) Is a Top Stock to Buy for Your TFSA

| Haris Anwar

Among the top banking stocks, Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is the safest bet for TFSA investors. Let's find out why.

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TD Bank (TSX:TD) Could Soar in a Canadian Bank Comeback

| Joey Frenette

TD Bank (TSX:TD)(NYSE:TD) looks like one of the most prudent ways to play a rebound in the Canadian banking scene…

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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.