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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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TSFA or RRSP – Better Place to Stash Cash in 2023?

| Amy Legate-Wolfe

If a recession hits us hard in 2023, you'll want the ability to take out cash if you need it.…

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TFSA Investors: Why You Should Invest Your Room ASAP With These 3 Stocks

| Adam Othman

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Is Now the Right Time to Buy Canadian Bank Stocks?

| Andrew Button

Some bank stocks, like Toronto-Dominion Bank (TSX:TD) are doing well; others, not so much. Is it time to buy bank…

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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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Bank Stocks

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

TFSA Pension: 2 Oversold Stocks for a Self-Directed Retirement Fund

| Andrew Walker

Top Canadian stocks are on sale right now.

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Retiring Soon? Should You Take Your CPP Pension at 60 or 65?

| Christopher Liew, CFA

Taking the CPP early or late depends on one’s health and financial situation. However, having other income sources from high-quality…

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Market Crash: Investing in Defensive Stocks

| Kay Ng

Sleep well at night in a market crash by investing defensively in stocks for long-term wealth creation.

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Market Rebound: 2 Battered Stocks That Could Soar in April

| Joey Frenette

Bank of Montreal (TSX:BMO)(NYSE:BMO) and another stock that has the most upside potential after the vicious sell-off in the TSX…

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Market Crash: A Top Dividend Stock to Buy Now

| Haris Anwar

Canada's top banking stocks are cheap after this market crash, offering a great opportunity for long-term investors to buy.

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Bear Market: 1 Blue-Chip Stock on Sale!

| Jared Seguin

Bear market alert! Stocks are plummeting fast, but long-term investors can capitalize by picking up extremely cheap shares of blue-chip…

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This 1 Market Crash Mistake Can Cause You to Lose More Money

| Christopher Liew, CFA

Panic is the worst enemy of investors in a market crash. One big mistake is selling a blue-chip asset like…

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Bank Stocks

Why TD Stock Will Outperform Its Peers This Year

| Chris MacDonald

What makes Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stand out from its peers?

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Take Emotion Out of Investing With These 2 Strategies

| Chris MacDonald

Looking for investment strategies in the current market? See my top two strategies, with Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM)…

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Market Crash 2020: Bank on This Stock!

| Jared Seguin

The COVID-19 related market crash is creating massive value opportunities. One of the best is this cheap Canadian bank stock!

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Market Crash: 3 Quality TSX Stocks on Sale

| Jared Seguin

Long-term investors are always looking for cheap stocks. With the recent market crash, these quality TSX stocks are on sale!

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Market Crash: This Is How You Should Invest

| Kris Knutson

Our global addiction to debt left us susceptible to this massive stock market crash which has affected everyone. In turbulent…

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Market Crash: 2 Reliable Dividend Stocks for TFSA Income Investors

| Andrew Walker

Canada's top dividend stocks are getting cheap. Is this the time to buy?

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Market Crash: Opportunity of a Lifetime to Get More Dividend Yield for Less

| Joey Frenette

Bank of Montreal (TSX:BMO)(NYSE:BMO) is one of many battered stocks that can allow income investors to safely reach for higher…

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Dividend Stocks

Bank of Montreal (TSX:BMO) Stock Already Crashed 50%: Why Now Is the Time to Buy

| Joey Frenette

Bank of Montreal (TSX:BMO)(NYSE:BMO) could be a lot closer to a bottom than most pessimistic Canadian investors think amid the…

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These 2 TSX Stocks Are Stupid Cheap

| Adam Othman

CIBC and Manulife stock is trading for dirt cheap prices right now, and it could be a fantastic time to…

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Will Canada’s Bank Stocks Cut Their Dividends?

| Nelson Smith

Canada's bank stocks should continue to pay dividends, even if the worldwide economy stays depressed for months. But one could…

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Bank Stocks

2 Top TSX Stocks to Buy Amid the Coronavirus Sell-off

| Christopher Liew, CFA

The fear that COVID-19 would become a tipping point for the market crash and the recession has eventually materialized. Buy…

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$82 Billion Rescue Package: Hope Is Around the Corner

| Christopher Liew, CFA

The federal government of Canada is rolling out a fiscal package to prop up the economy. In the banking sector,…

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The Dos and Don’ts of a Stock Market Crash

| Adam Othman

Amid steadily falling stock prices, it is critical to remain calm and invest in long-term prospects like the Royal Bank…

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Is the Passive Investing ETF Bubble Finally Bursting? The “Big Short” Guy Thinks So

| Adam Othman

Canadian equity shares have fallen by almost 30%, and it seems that the likes of ETFs like iShares S&P/TSX 60…

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RRSP Investors: Avoid These 3 Companies

| Chris MacDonald

Avoid these three value traps if you're looking to bolster your RRSP: Vermilion Energy (TSX:VET)(NYSE:VET), Badger Daylighting (TSX:BAD), and Canadian…

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Bank Stocks

What Rock-Bottom Bond Yields Mean for Investors

| Chris MacDonald

How should low bond yields change your investing strategy, particularly in the banking sector, in companies like Royal Bank of…

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New Investors: 2 Safe Dividend Stocks to Get Your Portfolio Started

| Kay Ng

These safe dividend stocks have durable businesses you can rely on for passive income, even during harsh economic environments.

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COVID-19 Investing: What Should You Do Now?

| Nelson Smith

In a world where COVID-19 fears have paralyzed many investors, what should you do know? Here are a couple of…

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Bank Stocks

1 Thing Not to Do During a Market Crash

| David Jagielski

If you're holding a blue-chip stock like The Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), there's little reason to worry right now.

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Canadian Banks Are at Crisis-Level Lows — Buy Them Now Before You Miss the Boat!

| Joey Frenette

Bank of Montreal (TSX:BMO)(NYSE:BMO) and other Canadian banks are too good to pass on after taking on a brunt of…

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Looking for Value and Income? These 3 Stocks Have You Covered

| Chris MacDonald

Investors looking for value and income, look no further. Discussion includes Toronto-Dominion Bank (TSX:TD)(NYSE:TD), Nutrien (TSX:NTR)(NYSE:NTR), and TC Energy (TSX:TRP)(NYSE:TRP).

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Market Crash 2020: 2 Stocks to Buy Now

| Amy Legate-Wolfe

Canadian banks fared as some of the best in the world during the last recession, so now is the time…

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1 Great Bank to Buy During the Bear Market

| Kris Knutson

In the midst of a bear market, it can be tough to buy stocks. Right now the Toronto Dominion Bank…

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Oversold Dividend Stocks: 2 High-Yield Picks for TFSA Income Investors

| Andrew Walker

The market crash is driving up yields on top Canadian dividend stocks.

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The Coronavirus and Oil Price Collapse Could Decimate Canada’s Economy, But Don’t Panic

| Matt Smith

Buy attractively valued Toronto-Dominion Bank (TSX:TD)(NYSE:TD) today and lock in a 5.9% yield.

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Dividend Stocks

TSX Dividend Stocks: Buy Now for Massive “Stock Market Crash” Yields

| Victoria Hetherington

Investors looking for the best TSX dividend stocks have a buy in blue-chip banker TD Bank (TSX:TD)(NYSE:TD). It’s time to…

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3 Solid Long-Term Dividend Winners

| Chris MacDonald

Income investors, look no further! Read about my top picks including Fortis Inc. (TSX:FTS)(NYSE:FTS), Telus (TSX:T) and Scotiabank (TSX:BNS)(NYSE:BNS).

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Bank Stocks

Canada’s Bank Stocks Present an Interesting Dilemma

| Chris MacDonald

Should investors be bear or bull on Canada's bank stocks, including Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM)?

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Dividend Stocks

TFSA Investors: 2 Ways to Protect Your Portfolio Against a Market Crash

| David Jagielski

Investing in a blue-chip stock like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a good way to help protect your portfolio over the long…

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Bank Stocks

Revealed: The Smart Money Is Buying This Canadian Bank Stock

| Nelson Smith

The company's CEO and other smart money investors are loading up on CIBC (TSX:CM)(NYSE:CM) shares. Should you be joining them?

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Dividend Stocks

The Golden Opportunity to Buy Stocks: Now’s the Time to Invest in These Top Stocks

| Kay Ng

Don't panic. Now's the best time to invest in the stock market. Average in over time.

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Stay Calm and Profit From the Latest Bear Market

| Matt Smith

Buy Royal Bank of Canada (TSX:RY)(NYSE:RY) today and lock in a juicy 4.9% dividend yield.

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Retirees: 3 Ways to Rebuild Your Pension after a Market Crash

| Jason Hoang

You can rebuild your pension post-market crash by re-assessing your holdings, reducing your expenses, and investing in a Dividend Aristocrat…

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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.