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

Bank Stocks

1 Reason to Avoid TD Bank (TSX:TD) After Earnings

| Ambrose O'Callaghan

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has suffered from narrowing margins in 2019, and this forced an earning miss in Q3.

Read more »

Stocks for Beginners

3 Stocks to Own for 30 Years

| Andrew Walker

Here's why Canadian National Railway Company (TSX:CNR)(NYSE:CNI) and two stocks with international assets deserve to be on your radar.

Read more »

Dividend Stocks

TFSA Investors: Use This Weird Trick to Really Supercharge Your Income

| Nelson Smith

A little options trading and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) shares are all it takes to generate a 15%…

Read more »

Bank Stocks

Why Royal Bank of Canada (TSX:RY) Is a No-Brainer Buy

| Christopher Liew, CFA

Royal Bank of Canada (TSX:RY)(NYSE:RY) should be in every investor’s portfolio. It’s a high-quality investment that can survive geopolitical risks,…

Read more »

Dividend Stocks

Royal Bank of Canada (TSX:RY) Is a Top Stock for Your TFSA

| Matt Smith

Buy Royal Bank of Canada (TSX:RY)(NYSE:RY) today and lock in a 4% yield.

Read more »

Dividend Stocks

The Safer High-Dividend Bank Stock for Your TFSA

| Debra Ray

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) earnings missed analyst estimates, but that didn't seem to bother confident shareholders on Thursday.

Read more »

Bank Stocks

A Recession Is Bad News for Canada and the Big Banks

| Matt Smith

Ignore growing market noise and buy Toronto-Dominion Bank (TSX:TD)(NYSE:TD) for the long term.

Read more »

Dividend Stocks

TFSA Investors: How to Earn $250 a Month in Tax-Free Dividends

| Mat Litalien, MBA

Investors can turn their $63,500 in max cumulative TFSA contribution room into a reliable, tax-free income stream.

Read more »

Dividend Stocks

Retirees: How to Boost Your Passive Income Every Year

| Kay Ng

Increase your income immediately with safe and undervalued dividend stocks such as Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM).

Read more »

Dividend Stocks

Millennial Investors: Yes, You Can Retire by 40. Here’s How

| Nelson Smith

It won't be easy to retire super early, but with the help of a ultra-high savings rate and great stocks…

Read more »

Dividend Stocks

TFSA 101: Earn $545 Per Month Tax-Free

| Andrew Walker

TC Energy Corp (TSX:TRP)(NYSE:TRP), a bank, and a major communications company all offer above-average dividends that continue to grow.

Read more »

Dividend Stocks

A High-Yield Dividend Payer With Stellar Earnings

| Debra Ray

It is time to buy National Bank of Canada (TSX:NA) while its dividend yield is 4.5%.

Read more »

Dividend Stocks

Dividend Investors: Build Your Bank Holdings Today

| Kris Knutson

Banks stocks are good value at the moment, especially those with dividends greater than 5%, like Bank of Nova Scotia…

Read more »

Dividend Stocks

Why Worried Investors Should Back Up the Truck on Scotiabank (TSX:BNS)

| Victoria Hetherington

There are several sensible reasons for domestic investors to buy Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) shares for a dividend portfolio…

Read more »

Dividend Stocks

Investor Beware: The Market Is Flashing This Grim Signal

| Christopher Liew, CFA

The inverted yield curve precedes a recession. If that is true, you should invest in recession-ready stocks. Toronto-Dominion Bank (TSX:TD)(NYSE:TD)…

Read more »

Bank Stocks

Bank of Montreal (TSX:BMO): Should You Buy the Stock Today?

| Andrew Walker

Bank of Montreal (TSX:BMO)(NYSE:BMO) is approaching its 12-month low. When should contrarian investors buy the stock?

Read more »

Dividend Stocks

Why CIBC (TSX:CM) Stock Could Be Headed to $130 After its “Relief” Quarter

| Joey Frenette

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) could be on a sustained rally to $130 after its latest earnings beat.

Read more »

Dividend Stocks

Bank of Nova Scotia (TSX:BNS) vs. Bank of Montreal (TSX:BMO): Which Is a Better Buy Today?

| Kay Ng

Is Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) or Bank of Montreal (TSX:BMO)(NYSE:BMO) a better investment after reporting their Q3 results?

Read more »

Dividend Stocks

Buy Opportunity: 2 High-Yield Dividend Stocks

| Debra Ray

On strong earnings, Bank of Montreal (TSX:BMO)(NYSE:BMO) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) just raised dividends.

Read more »

Dividend Stocks

A Top Dividend Stock to Buy When Recession Risks Are Increasing

| Haris Anwar

Royal Bank of Canada (TSX:RY)(NYSE:RY) is a top dividend stock that could provide a growing income stream, even during tough…

Read more »

Dividend Stocks

Meet Canada’s Warren Buffett: Prem Watsa

| Christopher Liew, CFA

Warren Buffett’s counterpart in Canada is Prem Watsa. His value stocks for investors’ consideration are BlackBerry Ltd (TSX:BB)(NYSE:BB) and Bank…

Read more »

Dividend Stocks

Is Toronto-Dominion Bank (TSX:TD) 1 of the Best Stocks for a TFSA?

| Haris Anwar

Here is what makes Toronto-Dominion Bank (TSX:TD)(NYSE:TD) one of the best stocks to stash in your TFSA.

Read more »

Dividend Stocks

Dividend Investors: Should You Buy CIBC (TSX:CM) Stock After Strong Earnings?

| Andrew Walker

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) just bounced after reporting solid fiscal Q3 results. Is the stock still oversold?

Read more »

Dividend Stocks

Kick-Start Your Retirement With These 3 Stocks

| Christopher Liew, CFA

Your journey to retirement should begin with the top dividend stocks. Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), Canadian Utilities Limited…

Read more »

Dividend Stocks

3 Stocks to Anchor a New RRSP Portfolio

| Andrew Walker

Nutrien Ltd. (TSX:NTR)(NYSE:NTR), a top bank, and a North American utility company should all be attractive picks right now.

Read more »

Dividend Stocks

3 Reasons Wall Street Is Worried About a Recession

| Andrew Button

Economists and Wall Street Analysts are sounding the alarm about a recession that could hit financials like Canadian Imperial Bank…

Read more »

Dividend Stocks

3 Dividend Stocks to Hold in Your TFSA for 50 Years

| Kay Ng

It’s time in the market that matters when it comes to investing in Alimentation Couche-Tard Inc. (TSX:ATD.B) and these two…

Read more »

Stocks for Beginners

TFSA Investors: Is Royal Bank of Canada (TSX:RY) a Cheap Stock?

| Andrew Walker

Royal Bank of Canada (TSX:RY) (NYSE:RY) just reported steady results in a turbulent market. Is it time to buy the…

Read more »

Dividend Stocks

Can You Get Rich by Investing in Bank of Montreal (TSX:BMO)?

| Christopher Liew, CFA

Bank of Montreal’s (TSX:BMO)(NYSE:BMO) favourable business mix and growth play make it the ideal stock investment for people aspiring to…

Read more »

Dividend Stocks

Please Don’t Keep Your TFSAs in Cash

| Kris Knutson

Most TFSA investors don't maximize their TFSA growth potential by holding cash instead of investing in companies like Royal Bank…

Read more »

Bank Stocks

Millennials: This 1 Stock Is All You Need to Start Investing

| Amy Legate-Wolfe

Even if you don't have much cash at hand, buying Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a great choice for your future.

Read more »

Dividend Stocks

3 Tips to Prepare You for a Worry-Free Market Crash

| Kay Ng

How will you and your stocks fare in a market crash? Let’s use Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) as…

Read more »

Dividend Stocks

3 High-Yield Dividend Stocks at Rock-Bottom Prices

| Kay Ng

If you're looking for high yield at low prices, consider Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and two other quality stocks.

Read more »

Dividend Stocks

How to Get Your TFSA to $1,000,000

| David Jagielski

If you're an investor looking to save for retirement, Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) could be a great stock to build…

Read more »

Dividend Stocks

3 Reasons Why a Buy-and-Hold Strategy Doesn’t Work for Every Stock

| David Jagielski

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) looks like a great long-term buy today, but it's not a guarantee to stay that way.

Read more »

Bank Stocks

How to Weather a Recession in 3 Easy Steps

| Christopher Liew, CFA

A recession will one day come. View it as a buying opportunity. If you had invested in Brookfield Asset Management…

Read more »

Dividend Stocks

CIBC (TSX:CM) Stock Is a Buy After a Solid Third Quarter

| Victoria Hetherington

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is fast becoming the stock pundit's Big Five ticker of choice.

Read more »

Dividend Stocks

How to Grow a $100,000 TFSA to $1,000,000 in 13 Years

| Kay Ng

Feast your eyes on the path to your $1,000,000 TFSA through investing in Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and another…

Read more »

Dividend Stocks

Scotiabank (TSX:BNS) Falls Into a Bear Market: Should You Get Greedy?

| Joey Frenette

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is in deep-value territory. Should you buy for your TFSA?

Read more »

Energy Stocks

These Quality Canadian Stocks Are Embarrassingly Cheap

| Amy Legate-Wolfe

Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Royal Bank of Canada (TSX:RY)(NYSE:RY) are both trading well below fair value, and definitely belong in your portfolio.

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.