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.

Recent Bank Stocks News

Dividend Stocks

Canadian Couples: How To Grow Your TFSA to $1 Million

| Andrew Walker

Investing in reliable dividend stocks such as Royal Bank of Canada (TSX:RY) (NYSE:RY) can turn a modest TFSA fund into…

Read more »

Dividend Stocks

Retirees: Boost Your RRSP Payments the Easy Way

| Andrew Button

If you want to boost your RRSP payments when you retire, stocks like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) could help.

Read more »

Dividend Stocks

The Easiest Way to Turn Your $6,000 TFSA Into $60,000

| Andrew Button

If you want to turn a small $6,000 TFSA balance into $60,000, dividend-growth stocks like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) can come…

Read more »

Dividend Stocks

2 Ways Canadians Are Underutilizing Their TFSAs

| David Jagielski

Holding a stock like Royal Bank of Canada (TSX:RY)(NYSE:RY) inside a TFSA can help you accumulate significant tax-free income.

Read more »

Dividend Stocks

5 Cheap Stocks for RRSP Investors

| Andrew Walker

Nutrien Ltd. (TSX:NTR)(NYSE:NTR) and another four top TSX Index stocks appear oversold today and deserve to be on your RRSP…

Read more »

Dividend Stocks

TFSA Investors: This Bank Stock Will Soar on Rising Dividends

| Debra Ray

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) just raised its dividend, and investors are going wild for the stock.

Read more »

Dividend Stocks

3 Blue-Chip Dividend Stocks Trading Near Their 52-Week Lows

| Jason Phillips

These three TSX blue-chip stocks are trading at their cheapest levels in a year, including Canada’s third-largest bank, Bank of…

Read more »

The Motley Fool
Bank Stocks

Stash Your Money in This Stock for the Next 30 Years

| Ryan Vanzo

Want to create your ideal portfolio that could outperform the market for 30 years or more? Learn how to achieve…

Read more »

Dividend Stocks

TFSA Investors: 3 Dividend Stocks Yielding Up to 11.2%

| Nelson Smith

High-income stocks like Chartwell Retirement Residences REIT (TSX:CSH.UN), National Bank of Canada (TSX:NA) and Canoe EIT Income Fund (TSX:EIT.UN) would…

Read more »

Dividend Stocks

Revealed: These 3 Financial Stocks Have Mammoth-Sized Dividends

| Nelson Smith

Power Financial Corp (TSX:PWF), IGM Financial Inc. (TSX:IGM), and First National Financial Corp (TSX:FN) are all offering some very succulent…

Read more »

Bank Stocks

Scotiabank (TSX:BNS): A Long-Term Play Immune to the U.S.-China Trade War

| Rahim Bhayani

There are a few companies that are significantly less correlated to the U.S.-China trade dispute. One of them is Bank…

Read more »

Dividend Stocks

Top 2 Reasons RBC (TSX:RY) Stock Missed Earnings

| Debra Ray

What you need to know about why the Royal Bank of Canada (TSX:RY)(NYSE:RY) failed to meet earnings goals for the…

Read more »

Dividend Stocks

These 2 Rules Are Warren Buffett’s Keys to Success

| Daniel Da Costa

Royal Bank of Canada (TSX:RY)(NYSE:RY) is a great stock for long-term investors. Buying Royal Bank at a fair price will…

Read more »

Dividend Stocks

TFSA Investors: Don’t Miss Out on These Tax-Free Benefits

| Debra Ray

A Royal Bank of Canada (TSX:RY)(NYSE:RY) survey finds that TFSA investors don’t take full advantage of their benefits.

Read more »

Dividend Stocks

1 of the Best Dividend Stocks to Buy and Earn a 5% Yield

| Haris Anwar

This is what makes Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) one of the best dividend stocks to buy now.

Read more »

Dividend Stocks

Should You Buy CIBC (TSX:CM) Before Thursday’s Earnings?

| Joey Frenette

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) will be a hot topic going into Thursday. Should you buy its battered shares?

Read more »

growing dividends
Dividend Stocks

TFSA Investors: 3 Stocks Paying Up to 8.2% in Dividends

| David Jagielski

Canadian Western Bank (TSX:CWB) and these two other stocks offer investors some great value and recurring dividend income as well.

Read more »

Bank Stocks

Which Stock Should You Buy: TD Bank (TSX:TD) or RBC (TSX:RY)?

| Adam Othman

Read on to understand why you should invest in Toronto-Dominion Bank (TSX:TD)(NYSE:TD) over Royal Bank of Canada (TSX:RY)(NYSE:RY) to make…

Read more »

Dividend Stocks

A Simple TFSA Strategy to Earn $7,645 in Tax-Free Income in 2020

| Andrew Walker

Here's how owning Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), a top telecom player, and a pipeline giant can set you up…

Read more »

Energy Stocks

2 Dividend Stocks Every Investor Should Know

| Ryan Vanzo

If you're looking for reliable, high-yield dividend stocks, now is your chance to capitalize on two promising opportunities: Intact Financial…

Read more »

Dividend Stocks

Dividend Investors: The Best Canadian Bank Stock to Buy Right Now

| Kay Ng

Here’s why this cheap bank stock may be a better buy than Toronto-Dominion Bank (TSX:TD)(NYSE:TD).

Read more »

Bank Stocks

Alert! This Bank Stock Is Dirt Cheap Right Now

| Ambrose O'Callaghan

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) stock is trading around 52-week lows ahead of its Q3 earnings release.

Read more »

Dividend Stocks

3 More Reasons This Big Bank Is on My Radar

| Demetris Afxentiou

Investors looking to buy into a well-diversified bank with income and growth prospects trading at a discount should consider Bank…

Read more »

Dividend Stocks

Is it Safe to Buy Toronto-Dominion Bank (TSX:TD) Stock Today?

| Andrew Walker

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is starting to look cheap, but market risks could push the stock price even lower in the…

Read more »

Dividend Stocks

1 Canadian Bank to Buy Right Now (And 1 to Sell)

| Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a stellar buy. Here's another bank that's a must-sell!

Read more »

Bank Stocks

32% of Canadians Are Making This RRSP and TFSA Mistake

| Christopher Liew, CFA

Toronto-Dominion Bank’s (TSX:TD)(NYSE:TD) dividend won’t be taxed if it's held in your RRSP instead of your TFSA.

Read more »

Dividend Stocks

2 Tips to Diversify Your TFSA Investment Portfolio

| Prosper Bakiny

Here is how Toronto-Dominion Bank (TSX:TD) (NYSE:TD) and this top-ranked REIT can help add diversification to your TFSA investment portfolio.

Read more »

Dividend Stocks

TFSA Investors: This Top Bank Stock Is Now Paying 4.1%

| David Jagielski

Royal Bank of Canada (TSX:RY)(NYSE:RY) has earnings this week, and with the stock down in price lately, it could be a…

Read more »

Dividend Stocks

2 Top Stocks to Build TFSA Wealth

| Andrew Walker

Here's why Canadian National Railway Company (TSX:CNR)(NYSE:CNI) and a top Canadian bank deserve to be on your TFSA radar.

Read more »

Dividend Stocks

3 Cheap Dividend Stocks for RRSP Investors

| Andrew Walker

Here's why Nutrien Ltd. (TSX:NTR) (NYSE:NTR) and another two top Canadian stocks deserve to be on your RRSP radar today.

Read more »

Dividend Stocks

5 Unique Tips to Prepare for a Market Crash

| Kay Ng

You don’t need to worry if you prepare for a market crash by having Royal Bank of Canada (TSX:RY)(NYSE:RY) and…

Read more »

Dividend Stocks

3 Dividend Stocks That Have Never Missed a Payout

| Amy Legate-Wolfe

If you're looking to hunker down during a recession, it doesn't get better than these three bank stocks.

Read more »

Bank Stocks

The Number 1 Mistake Millennials Are Making

| Amy Legate-Wolfe

While saving can be an issue, for millennials there's another problem all together.

Read more »

Dividend Stocks

Avoid the Most Common Mistake With Your CPP

| Christopher Liew, CFA

Retirees should aim for a higher monthly pension and avoid the early collection of CPP payments. And investing in a…

Read more »

Dividend Stocks

Don’t Retire If You Can’t Answer 3 Simple Questions

| Christopher Liew, CFA

Before you finally decide to retire, assess your future expenses and find a suitable dwelling. But it would be helpful…

Read more »

Bank Stocks

TFSA Investors: Should You Trust Bank Stocks Today?

| Ambrose O'Callaghan

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Canada’s other top banks are set to release earnings as the central bank wrestles with worrying…

Read more »

Bank Stocks

Q3 Stock Earnings Preview: Scotiabank

| Ambrose O'Callaghan

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is set to release its third quarter earnings report in late August.

Read more »

Dividend Stocks

These Quality Canadian Stocks Are Trading at 52-Week Lows

| Kay Ng

Feast on quality but cheap Canadian Tire Corporation Limited (TSX:CTC.A) stock and start collecting juicy, growing dividend income!

Read more »

Stocks for Beginners

A Stock You Can Buy Now — and Get Paid for the Rest of Your Life 

| Haris Anwar

The Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a solid dividend stock to buy now and earn a steady flow of income the…

Read more »

Dividend Stocks

Income Investors: Want to Get a 3% Yield With No Money Down?

| Kris Knutson

Robert Kiyosaki, author of many financial resource books, including his seminal, “Rich Dad, Poor Dad,” said the best way to…

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.