Motley Fool Premium
  1. Category
    2. /
  2. Investing
    3. /
  3. Bank Stocks
    4. /

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. 

[KevelPitch adtype=151]

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?

Read more »

Bank Stocks

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.…

Read more »

Dividend Stocks

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

| Adam Othman

Choosing the right TFSA stocks for your portfolio might take some time. But with the right choices, you can stick…

Read more »

Bank Stocks

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…

Read more »

Bank Stocks

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.

Read more »

Bank Stocks

Better Buy: RBC Stock or the Entire TSX?

| Brian Paradza, CFA

Buying Royal Bank of Canada (TSX:RY) stock lets you invest like Warren Buffett does, but investing in the entire TSX…

Read more »

Bank Stocks

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.

Read more »

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.

Read more »

Recent Bank Stocks News

Dividend Stocks

CRA COVID-19 Updates: 3 Big Tax Changes You Should Know

| Christopher Liew, CFA

The CRA tax reliefs and dividend earnings from the BMO stock in a TFSA should provide ample financial support in…

Read more »

Dividend Stocks

Have a Savings Account? Why Your Interest Income May Be Down 95%!

| David Jagielski

Low savings rates at the big banks are no match for the dividend income investors can earn from a top…

Read more »

Dividend Stocks

Why the Canada Revenue Agency Might Ask You for Those CERB Payments Back

| David Jagielski

CERB payments can boost your income today, but dividend income from Bank of Montreal (TSX:BMO)(NYSE:BMO) can give you recurring income over…

Read more »

Dividend Stocks

Retire Early From the 2020 Market Crash

| Kay Ng

It doesn’t matter which stage you are in your life. You can retire early from this market crash with the…

Read more »

Dividend Stocks

Retirees: Can You Retire on Just CPP and OAS Payments?

| Aditya Raghunath

Investing in high-quality dividend stocks is an easy way to generate recurring income and supplement retirement payouts.

Read more »

Dividend Stocks

If You’ve Got $5,000, Buy These 3 TSX Stocks Right Now

| Adam Othman

The stock market is still recovering, with many amazing stocks trading below their fair valuation. This is an opportunity for…

Read more »

Dividend Stocks

Hooray! Pay Your Taxes Later With This 2020 CRA Emergency Change

| Christopher Liew, CFA

The tax date changes by the CRA give Canadian taxpayers an ample grace period to fulfill their obligations in the…

Read more »

Dividend Stocks

The Worst Mistake TFSA Investors Can Make Right Now

| Haris Anwar

Here is how a TFSA investor can avoid making a classic mistake when there is doom and gloom everywhere.

Read more »

Dividend Stocks

Sell in May and Go Away? Don’t.

| Mat Litalien, MBA

The sell in May strategy is based on false assumptions. Likewise, selling when most stocks have still trading near year…

Read more »

Bank Stocks

Should You Buy Bank of Montreal (TSX:BMO) Stock Ahead of Earnings?

| Ambrose O'Callaghan

Bank of Montreal (TSX:BMO)(NYSE:BMO) stock may not bounce back overnight, but that does not mean investors should ignore it as…

Read more »

Dividend Stocks

Income Investors: 7% Dividend Yields That Are Actually Safe

| Joey Frenette

Enbridge (TSX:ENB)(NYSE:ENB) and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) sport dividend yields that aren't too good to be true for…

Read more »

Bank Stocks

Is a Huge Housing Market Crash Likely in 2020?

| Christopher Liew, CFA

Every time there is talk about a housing market crash, CIBC stock comes into focus. The bank with the highest…

Read more »

Dividend Stocks

TFSA 101: How Retired Couples Can Maximize Tax-Free Income

| Andrew Walker

Here's how retirees can generate income without paying additional tax.

Read more »

Bank Stocks

Top Dividend Stocks: 2 for TFSA Investors

| Jared Seguin

With markets still unsettled, there are opportunities abound. TFSA investors can secure long-term upside with these two top dividend stocks.

Read more »

Dividend Stocks

TFSA Users: 3 Strong Signals That a Market Rally Is Moments Away

| Christopher Liew, CFA

Signals are emerging that momentum is starting to build in the TSX. TFSA users thinking of investing again should consider…

Read more »

Dividend Stocks

CIBC (TSX:CM) Stock: Is This 7% Dividend Yield the Deal of the Decade?

| Andrew Walker

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

Read more »

Dividend Stocks

Generate $1,000 of Income in the Market Rally

| Mat Litalien, MBA

Investing in high quality dividend stocks is an easy way to generate $1,000 in income annually. These stocks are likely…

Read more »

Dividend Stocks

Is TD Bank Stock a Buy Right Now?

| Aditya Raghunath

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a bargain today and investors could miss out on an amazing opportunity if they don't buy…

Read more »

Bank Stocks

Income Investors: With a 5.5% Yield, TD Bank (TSX:TD) Is a Buy Today

| Kris Knutson

If there is a prolonged economic slowdown, you will need to pick the right bank. Holding a diversified bank like…

Read more »

Bank Stocks

1 Ultra-High-Yielding TSX Stock to Watch

| Jared Seguin

With markets still displaying volatility, long-term investors are seeking out value picks for the long run. This high-yielding TSX stock…

Read more »

Coronavirus

Stock Market Rally in May? 3 Metrics to Watch

| Victoria Hetherington

Stocks like Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) track the economy. Here’s what else to look out for.

Read more »

Dividend Stocks

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

| Andrew Walker

The share price of TD (TSX:TD) (NYSE:TD) appears cheap right now, but market risks remain. Is this the right time…

Read more »

Dividend Stocks

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.

Read more »

Dividend Stocks

$3,000 Invested in 3 Value Stocks Could Make You a Fortune in 10 Years

| Christopher Liew, CFA

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

Read more »

Dividend Stocks

A Canadian Bank That’s Still Down 50% From All-Time Highs!

| Joey Frenette

Canadian Western Bank (TSX:CWB) is a Canadian bank that value investors shouldn't count out if they seek deep value on…

Read more »

Dividend Stocks

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.

Read more »

Bank Stocks

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

| Kay Ng

There is lots to like about Royal Bank of Canada (TSX:RY)(NYSE:RY) stock, but wait for the crash before buying (more)…

Read more »

Dividend Stocks

Behind Cargojet’s (TSX:CJT) Stock Price Surge

| Debra Ray

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

Read more »

Bank Stocks

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?

Read more »

Bank Stocks

Dividend Aristocrats: 2 to Buy Cheap!

| Jared Seguin

With markets whipping around each day, long-term investors can seek shelter with these two Dividend Aristocrats. Found out why today.

Read more »

Bank Stocks

Top TSX Stocks: How to Invest $6,000 Now

| Jared Seguin

With the markets bouncing around, top TSX stocks are now offering value to investors. Check out this solid blue-chip stock…

Read more »

Dividend Stocks

#1 Tech Stock to Buy After COVID-19 Crisis

| Debra Ray

You should buy stock in Open Text (TSX:OTEX)(NASDAQ:OTEX) or the S&P/TSX Capped IT Index for strong returns during the COVID-19…

Read more »

Dividend Stocks

4 Top Canadian Bank Stocks for Dividend Investors

| Victoria Hetherington

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) joins three other big names in Canadian bank stocks in a breakdown of buyability.

Read more »

Dividend Stocks

Will a Coronavirus Recession Decimate Canada’s Big Banks?

| Matt Smith

Canadian bank stocks are vulnerable to a coronavirus recession, but Royal Bank of Canada (TSX:RY)(NYSE:RY) will emerge in a solid…

Read more »

Dividend Stocks

Coronavirus Recession: Should You Sell Your Stocks Now?

| Kay Ng

We're in a recession. Before you buy a stock, know what you plan to get out of it. Is it…

Read more »

Dividend Stocks

These 3 Canadian Gems Are on Sale Now

| Chris MacDonald

Three Canadian gems are now on sale: Royal Bank of Canada (TSX:RY)(NYSE:RY), Enbridge Inc. (TSX:ENB)(NYSE:ENB), and Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM).

Read more »

Dividend Stocks

TFSA Investors: How to Turn $10,000 Into $100,000

| David Jagielski

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

Read more »

Dividend Stocks

Top Dividend Stocks to Buy on the TSX Index

| Mat Litalien, MBA

Dividend cuts are accelerating. Find safety in top dividend stocks such as Fortis (TSX:FTS) and Toronto-Dominion Bank (TSX:TD).

Read more »

Bank Stocks

2 Top Stocks to Start a TFSA Retirement Fund

| Andrew Walker

Here's how young Canadians can use the TFSA to save a bundle for retirement.

Read more »

Dividend Stocks

2 Awesome TSX Stocks That Just Became Too Cheap to Ignore

| Christopher Liew, CFA

The 2020 market sell-off has opened up excellent buying opportunities. You can purchase Bank of Montreal and Toronto Dominion Bank…

Read more »

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.