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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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| Andrew Button

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2 Bank Stocks to Load Up on in a Recession

| 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

Bank Stocks

Market Crash Alert: TD Bank (TSX:TD) Stock Has Plunged 20%

| Cindy Dye

During this market crash, Canadian banks are especially vulnerable to the volatility of the oil industry due to their exposure…

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Royal Bank of Canada (TSX:RY) Is a Dividend King That Must Be Bought

| Joey Frenette

Royal Bank of Canada (TSX:RY)(NYSE:RY) is hardly the cheapest stock on the TSX Index, but it is a terrific value…

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Bank Stocks

Bank of Nova Scotia’s (TSX:BNS) Exposure to Latin America Will Cause its Share Price to Fall Further

| Matt Smith

Bank of Novia Scotia (TSX:BNS)(NYSE:BNS) will be sharply impacted by the market crash and coronavirus fallout in Latin America.

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These ETFs Are the Best Way to Buy Canadian Banks

| Kris Knutson

It can be difficult to choose which Canadian bank to own. Take away the guesswork by purchasing an ETF like…

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Market Crash: These 2 Stocks are a Prize Catch After a Rough Q1

| Christopher Liew, CFA

After a shocking market crash in Q1, Canadian investors might be hesitant to invest in the TSX right now. But…

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Market Crash: Build Wealth With These TSX Stocks

| Jared Seguin

With the recent market crash, there are opportunities for investors to build long-term wealth. Consider buying these two TSX stocks…

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Is TD Bank’s (TSX:TD) Stock a Buy After Its Latest Announcement?

| Andrew Button

The Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has confirmed no job losses in 2020 from COVID-19.

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The 2020 Market Crash Has Created an Opportunity to Build Wealth

| Matt Smith

After the 2020 market crash buy attractively valued Royal Bank of Canada (TSX:RY)(NYSE:RY) today and lock-in a 5% dividend yield.

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Market Crash – 1 Canadian Bank to Buy Today

| Nicholas Dobroruka

The volatility and market crash we’ve seen this year have been off the charts. Here is one stable dividend payer…

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TD Bank (TSX:TD) Stock Just Fell 19%: Is This Your Chance?

| Ryan Vanzo

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) shares were once rock solid, but the recent market crash may provide a lucrative buying opportunity.

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Market Crash: 2 Top Dividend Stocks to Start a Self-Directed TFSA Pension

| Andrew Walker

Top dividend stocks are now trading at cheap prices for TFSA investors.

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Market Crash: How to Invest $6,000 Now

| Jared Seguin

The recent market crash has sent blue-chip stocks barreling lower. TFSA investors with extra cash can take advantage of this…

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Have $1,000 to Invest? Buy Canada’s Most Profitable Bank Today

| Matt Smith

After the market crash buy attractively valued National Bank of Canada (TSX:NA) today and lock-in a 5.6% dividend yield.

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Bank Stocks

2 Financial Services Stocks to Buy When the Time Is Right

| Aditya Raghunath

Here's why investors can look to buy these two insurance giants on the market rebound.

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TSX Stocks: 2 Canadian Heavyweights Yielding 8%

| Vineet Kulkarni

These 2 top TSX stocks not only offer higher dividend yields but strong growth potential as well for the long…

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Bank Stocks

Bank of Montreal (TSX:BMO) Just Became the Best Bank for Your Buck

| Joey Frenette

Bank of Montreal (TSX:BMO)(NYSE:BMO) is a ridiculously cheap dividend king to buy amid the coronavirus crash.

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Warren Buffett Advice: How to Build Great Wealth

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| Andrew Walker

Top Canadian dividend stocks appear cheap right now for TFSA investors.

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Emergency Response Benefit in Canada: How Much Can You Get in 2020?

| Adam Othman

Consider investing in the Toronto-Dominion stock for your TFSA, but if you're in a financial emergency, the CERB can help…

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| Christopher Liew, CFA

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Market Crash Caution: 2 Big Mistakes to Avoid

| Adam Othman

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| Amy Legate-Wolfe

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2 Top Dividend Stocks to Buy in April 2020

| Kay Ng

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Bank Stocks

Market Crash: How TFSA Investors Can Turn $10,000 Into $100,000

| David Jagielski

The market crash has made Toronto-Dominion Bank (TSX:TD)(NYSE:TD) a bargain buy today.

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Market Crash: Bank on Safe Dividend Stocks

| Kay Ng

In a market crash, it's super helpful to buy safe dividend stocks for juicy passive income. Bank on these 5-6%…

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Market Crash: Is Laurentian Bank (TSX:LB) Stock About to Implode?

| Ryan Vanzo

Laurentian Bank of Canada (TSX:LB) has been hit by the market crash, pushing its dividend up to 8.8%. The worst…

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Better Buy: Royal Bank of Canada (TSX:RY) or CIBC (TSX:CM)?

| Joey Frenette

Should you buy Royal Bank of Canada (TSX:RY)(NYSE:RY) or CIBC (TSX:CM)(NYSE:CM) after the recent coronavirus-driven market crash?

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Market Crash (2020): Don’t Fall Victim to This Mental Mistake

| Christopher Liew, CFA

With holdings such as CNR and BMO, investors should suppress the urge of loss aversion and refrain from selling off…

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What the Spanish Flu Pandemic of 1918 Tells Us About the Stock Market

| Andrew Button

Despite the economic effects of the Spanish Flu, the Bank of Montreal (TSX:BMO)(NYSE:BMO) still paid its dividend.

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TFSA Wealth: 1 Choice During a Market Crash That Can Make You Rich

| Christopher Liew, CFA

Long-term TFSA investors can add fortune to their accounts by investing in oversold options like Canada Goose stock and CIBC…

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Market Crash 2020: 2 Crazy-Cheap Blue-Chip Stocks!

| Jared Seguin

Stocks have been bouncing around with the recent market crash. If you're looking at a long-term investment horizon, these blue-chip…

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These 2 TSX Stocks Can Thrive After Major Market Crashes

| Adam Othman

The Royal Bank of Canada stock and Constellation Software stock are likely to thrive after the market crash.

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2 Resilient TSX Stocks That Can Survive This Coronavirus Crash

| Christopher Liew, CFA

Fortis stock and RBC stock could be the best options to hedge one’s bets during the ongoing bearish market streak.

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TD Bank (TSX:TD) Stock Has Gotten Too Cheap to Ignore

| Andrew Button

The Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock appears undervalued in this market crash.

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Bank Stocks

Got $5,000? Make $100K the Easy Way

| Amy Legate-Wolfe

You don't have to take risks to find a stock that'll make you some easy money. All you need is…

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Dividend Stocks

Have $1,000? Buy This Top Canadian Bank Yielding 5% Today

| Matt Smith

During the market crash, buy attractively valued Royal Bank of Canada (TSX:RY)(NYSE:RY) and lock in a 5% yield.

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Bank Stocks

Contrarian Investors: Is CIBC (TSX:CM) or TD (TSX:TD) Stock a Market Crash Buy Today?

| Andrew Walker

Investors want to know which Canadian bank stock might be a top contrarian pick today.

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close-up photo of investor Warren Buffett
Dividend Stocks

Invest Like Warren Buffett to Profit From the 2020 Market Crash

| Matt Smith

Profit from the market crash and buy Toronto-Dominion Bank (TSX:TD)(NYSE:TD) today to lock-in a 5% yield.

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Dividend Stocks

How to Invest in a Market Crash

| Mat Litalien, MBA

How to invest during the most pronounced market crash in history is not easy. Consider undervalued stocks such as the…

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Bank Stocks

TSX Stocks: Is it Really a Good Time to Buy Amid the Market Crash?

| Vineet Kulkarni

Keep things simple and buy top TSX stocks. This Canadian heavyweight offers an encouraging risk/reward proposition for long-term investors.

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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.