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

Bank Stocks

Q3 Stock Earnings Preview: Toronto-Dominion Bank

| Ambrose O'Callaghan

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock has stumbled over the last month but it boasts solid value today.

Read more »

Stocks for Beginners

Millennials: 3 Things Not to Learn From Your Baby Boomer Parents

| Amy Legate-Wolfe

Don't make the same mistakes as your parents! The best thing you can do for your future is start investing…

Read more »

Dividend Stocks

TFSA Investors: 3 Bank Stocks Paying up to 5.9% in Dividends

| David Jagielski

National Bank of Canada (TSX:NA) and these two other bank stocks are solid buys that any investor can build their portfolio…

Read more »

Bank Stocks

The 1 Stock You Need to Retire Rich

| Amy Legate-Wolfe

It doesn't to be risky or difficult to reach riches, just invest in a stock like Toronto-Dominion Bank (TSX:TD)(NYSE:TD).

Read more »

Stocks for Beginners

Is Bank of Nova Scotia (TSX:BNS) Stock Your Top Bank Pick for 2020?

| Andrew Walker

Bank of Nova Scotia (TSX:BNS) (NYSE:BNS) is out of favour with investors this year. Will that change in 2020?

Read more »

Dividend Stocks

3 Extremely Popular Stocks Hitting New Lows

| Brian Pacampara, CFA

Hunting for a bargain? This group of beaten-down stocks, including Aurora Cannabis (TSX:ACB)(NYSE:ACB), might provide the value you're looking for.

Read more »

Dividend Stocks

Why This Stock Could Be a Better Buy Than Royal Bank (TSX:RY)

| David Jagielski

Royal Bank of Canada (TSX:RY)(NYSE:RY) is a good stock to hold if you're looking for some dividend income, but this other…

Read more »

Dividend Stocks

Danger: How to Invest After Wednesday’s Yield Curve Inversion

| Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a stock to be greedy with while others are fearful!

Read more »

Dividend Stocks

Better Buy Ahead of Earnings: Royal Bank of Canada (TSX:RY) or CIBC (TSX:CM) Stock

| Mat Litalien, MBA

Next week, Royal Bank of Canada (TSX:RY) and Canadian Imperial Bank of Commerce (TSX:CM) are reporting third quarter results.

Read more »

Dividend Stocks

TFSA Investors: 3 Stocks To Avoid Like The Plague

| Christopher Liew, CFA

TFSA investors should pass up on Bonterra Energy Corp. (TSX:BNE), Canadian Banc Corp. (TSX:BK), and SNC-Lavalin Group Inc. (TSX:SNC).

Read more »

Dividend Stocks

TFSA Investors: 2 Costly Mistakes You’ll Want to Avoid!

| David Jagielski

A TFSA is a great place to hold shares of a stock like Toronto-Dominion Bank (TSX:TD)(NYSE:TD), but if you're an active…

Read more »

Bank Stocks

TFSA Investors: This Banking Stock Has Significant Upside Potential

| Aditya Raghunath

Why Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock should excite long-term investors.

Read more »

Bank Stocks

TFSA Investors: This High Dividend Banking Stock Is Undervalued

| Aditya Raghunath

Why Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) stock is a good buy at the current price.

Read more »

Dividend Stocks

3 High-Yield Stocks at Rock-Bottom Prices

| Amy Legate-Wolfe

Looking for strong dividends in this volatile market? Consider Enbridge Inc. (TSX:ENB)(NYSE:ENB) and these other two stellar stocks.

Read more »

Dividend Stocks

3 Dividend Aristocrats With Fantastic Yields

| Christopher Liew, CFA

Dividend aristocrats Canadian Utilities Limited (TSX:CU), Laurentian Bank of Canada (TSX:LB), and Cineplex Inc. (TSX:CGX) can boost any stock portfolio…

Read more »

Dividend Stocks

3 Canadians Stocks to Buy for 2020

| Joey Frenette

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and two other stocks that could make you filthy rich in 2020.

Read more »

Dividend Stocks

This Is the Only Mistake You Need to Avoid in Your TFSA

| Kay Ng

Don’t horse around with your TFSA portfolio. Buy dividend stocks like Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) when they’re cheap…

Read more »

Dividend Stocks

How to Turn Your Kid Into a Millionaire

| Christopher Liew, CFA

Financial discipline in children can start at an early age. When they reach the proper investing age, they can become…

Read more »

Dividend Stocks

3 Super Stocks for RRSP Retirement Savers

| Andrew Button

If you're saving for retirement, stocks like Canadian National Railway (TSX:CNR)(NYSE:CNI) can be great buys

Read more »

Dividend Stocks

2 Cheap Stocks for a TFSA Retirement Fund

| Andrew Walker

Canadian Natural Resources Ltd. (TSX:CNQ) (NYSE:CNQ) and Canada's oldest bank deserve to be on your radar right now.

Read more »

Dividend Stocks

Does This Canadian Bank Stock Have the Most Upside Potential Right Now?

| Victoria Hetherington

Still undervalued, Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) could have more growth ahead of it than its peers.

Read more »

Dividend Stocks

Is It Too Early to Buy This Dividend Aristocrat Yielding Almost 4%?

| Matt Smith

Canadian Western Bank (TSX:CWB) is too cheap to ignore and is offering a juicy yield of almost 4%.

Read more »

Dividend Stocks

Canadian Imperial Bank of Commerce (TSX:CM): Too Cheap to Ignore

| Matt Smith

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is attractively valued and yielding a juicy 5.7%.

Read more »

Bank Stocks

2 Top Blue Chip Stocks to Buy Before 2020

| Amy Legate-Wolfe

Looking for some buy and hold options? Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and this other stock are trading on the cheap.

Read more »

Dividend Stocks

This 1 Stock Is All You Need to Help Save for Retirement

| David Jagielski

Whatever your investment goal is, it's hard to go wrong with including a top bank stock like Bank of Montreal (TSX:BMO)(NYSE:BMO)…

Read more »

Bank Stocks

Retirees: What Stocks to Avoid Approaching Retirement

| Debra Ray

Canada Goose Holdings Inc (TSX:GOOS)(NYSE:GOOS) announced earnings on Wednesday, and it still isn’t a better buy than these two bank…

Read more »

Dividend Stocks

Retirees: Check Out This Cheap High-Yield Stock for TFSA Income in 2020

| Andrew Walker

Bank of Nova Scotia (TSX:BNS) (NYSE:BNS) might be a top income pick heading into next year.

Read more »

Dividend Stocks

RRSP Investors: Is CIBC (TSX:CM) Stock Too Cheap to Ignore?

| Andrew Walker

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) trades at a significant discount to its larger peers. Is the pullback overdone?

Read more »

Dividend Stocks

3 High-Yield Dividend Stocks at Rock-Bottom Prices

| Andrew Button

If you're looking for high yield at low price, consider Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM)

Read more »

Dividend Stocks

Should Royal Bank of Canada (TSX:RY) Stock Be on Your TFSA Buy List Today?

| Andrew Walker

Royal Bank of Canada (TSX:RY) (NYSE:RY) is the largest company on the TSX Index with market capitalization of $145 billion.…

Read more »

Dividend Stocks

TFSA Tips and Tricks: 3 Ways to Max Out Your Account

| Christopher Liew, CFA

Any TFSA investor should follow the proper rules for managing the account. With Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) or Fortis…

Read more »

Bank Stocks

2 Stocks That Are Too Cheap to Ignore

| Ryan Vanzo

Cheap stocks are a great way to make a lot of money over the long term. If you're looking for…

Read more »

Energy Stocks

Should You Buy Suncor Energy (TSX:SU) or Toronto-Dominion Bank (TSX:TD) Stock for Your TFSA Today?

| Andrew Walker

Suncor Energy Inc. (TSX:SU)(NYSE:SU) and Toronto Dominion Bank (TSX:TD)(NYSE:TD) are two of Canada's top companies. Is one a better bet…

Read more »

Energy Stocks

Toronto-Dominion Bank (TSX:TD) Thinks Canadian Investors Are in Trouble

| Ryan Vanzo

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is concerned that the Canadian savings rate has fallen to its lowest level in more than a…

Read more »

Bank Stocks

2 Growth Stocks for the Next 20 Years

| Ryan Vanzo

Two growth stocks, Fairfax India Holdings Corp. (TSX:FIH.U) and Fairfax India Holdings Corp. (TSX:FIH.U), could add huge upside to your…

Read more »

Stocks for Beginners

Everything You Need to Know About Starting a TFSA

| Amy Legate-Wolfe

New to investing? A TFSA is a great place to start.

Read more »

Dividend Stocks

Investors: 2 Top “Forever Assets” to Stash in Your TFSA Today

| Nelson Smith

You can't beat TC Energy Corp (TSX:TRP)(NYSE:TRP) or Toronto-Dominion Bank (TSX:TD)(NYSE:TD) as long-term stalwarts for your portfolio.

Read more »

Energy Stocks

These Top Stocks May Be in Trouble Next Year

| Ryan Vanzo

If you're invested in top stocks like Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), Shopify Inc (TSX:SHOP)(NYSE:SHOP), or Baytex Energy Corp. (TSX:BTE)(NYSE:BTE),…

Read more »

Bank Stocks

Q3 Earnings Preview: Canada’s Top Bank

| Ambrose O'Callaghan

Royal Bank of Canada (TSX:RY)(NYSE:RY) is set to release its third quarter results later this month.

Read more »

Dividend Stocks

Better Buy: Toronto-Dominion Bank (TSX:TD) vs. Canadian Western Bank (TSX:CWB)

| Andrew Button

The Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is the fastest-growing big six bank, but this smaller bank may be even better

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.