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

Here Are 2 Very Different Banks, Both Compelling Investment Options

| Demetris Afxentiou

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and National Bank of Canada (TSX:NA) are both interesting picks for income- and growth-seeking investors alike.

Read more »

Dividend Stocks

RRSP Alert: 3 Stocks to Build Retirement Wealth

| Andrew Walker

Saputo Inc. (TSX:SAP) and another two Canadian giants have made buy-and-hold investors rich.

Read more »

Dividend Stocks

3 Top TFSA Stocks to Buy in July and Earn Higher Yield

| Haris Anwar

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is among three top stocks that look ideal for your TFSA.

Read more »

Dividend Stocks

This Bank May Have the Most Upside

| Joey Frenette

Why CIBC (TSX:CM)(NYSE:CM) is a top pick for income investors in July.

Read more »

Dividend Stocks

TFSA Top Pick: 3 Dividend Stocks for Retirees

| Andrew Walker

Bank of Montreal (TSX:BMO)(NYSE:BMO) and these two other attractive stocks provide an average yield of 5.5%.

Read more »

Dividend Stocks

Is It Time for Investors to Reconsider CIBC (TSX:CM) Stock?

| Andrew Button

After years of tepid returns, Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) stock may be a buy

Read more »

Dividend Stocks

TFSA Investors: 2 Stocks to Buy and Hold Forever

| David Jagielski

Royal Bank of Canada (TSX:RY)(NYSE:RY) and this other dividend stock could be great investments to hold for decades and they can…

Read more »

Dividend Stocks

Why Buying TD Bank (TSX:TD) Stock Offers Growth to First-Time Dividend Investors

| Victoria Hetherington

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) offers newcomers to the TSX an often elusive element in dividend investing.

Read more »

Dividend Stocks

Why All Canadian Investors Should Own TD Bank (TSX:TD) Stock

| Andrew Button

Strong growth in the U.S. has made Toronto-Dominion Bank (TSX:TD)(NYSE:TD) Canada's best-performing bank stock.

Read more »

Dividend Stocks

High-Yield TFSA Investors: Is CIBC (TSX:CM) or Enbridge (TSX:ENB) Stock a Buy Right Now?

| Andrew Walker

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) offer above-average yields and appear oversold. Is one a better…

Read more »

Bank Stocks

Millennial Couples: Here’s How You Can Build a $5 Million TFSA

| Nelson Smith

Owning great long-term winners like A&W Revenue Royalties Income Fund (TSX:AW.UN) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) will help any TFSA.

Read more »

Dividend Stocks

Bargain Hunters: 2 Dividend Stocks Near Their 52-Week Lows

| David Jagielski

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and this other dividend stock have declined significantly over the past year and could have…

Read more »

Dividend Stocks

3 TSX Index Stocks to Buy in July

| Andrew Button

With a rising Canadian dollar, stocks like Air Canada (TSX:TD)(NYSE:TD) may be great picks for July

Read more »

Dividend Stocks

How to Retire Early

| Andrew Walker

Here's how owning top dividend stocks such as Royal Bank of Canada (TSX:RY)(NYSE:RY) can help you meet your early retirement…

Read more »

Dividend Stocks

Lazy Investors: 3 Stocks to Earn a Growing Passive Income Stream of $3,666/Year

| Amy Legate-Wolfe

Inter Pipeline Ltd. (TSX:IPL), Toronto-Dominion Bank (TSX:TD)(NYSE:TD), and one other stock offer $3,666 in annual income, but there's one step further you…

Read more »

Stocks for Beginners

This Top Dividend Stock Should Pay You for the Rest of Your Life

| Haris Anwar

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is one top dividend stock that pays regularly and is well suited for income-seeking investors.

Read more »

Dividend Stocks

3 Small-Cap Stock Picks for July

| Ryan Vanzo

If you're a long-term investor, your portfolio needs small-cap stocks. Learn how to add big upside with stocks like goeasy…

Read more »

Dividend Stocks

3 Blue Chip Stocks Set to Outperform Now That Interest Rates Are Lower

| Jason Phillips

Three Canadian blue-chip stocks poised to benefit from lower interest rates including Royal Bank of Canada (TSX:RY)(NYSE:RY) thanks to its…

Read more »

Stocks for Beginners

3 RRSP Stocks to Own for Decades

| Andrew Walker

Here's why Brookfield Asset Management Inc. (TSX:BAM.A) (NYSE:BAM) and another two Canadian titans deserve to be on your RRSP radar…

Read more »

Dividend Stocks

3 Top Stocks to Buy in July

| Kay Ng

It’s time to back up the truck in these top stocks, including Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), as they trade…

Read more »

Dividend Stocks

Can You Get Rich by Investing in Bank of Nova Scotia (TSX:BNS)?

| Christopher Liew, CFA

Bank of Nova Scotia’s (TSX:BNS)(NYSE:BNS) excellent track record of dividend growth and dividend payments make the stock your best investment…

Read more »

Dividend Stocks

1 Top Tier Banking Stock to Purchase Right Now

| Christopher Liew, CFA

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is the stock made for income investors looking for a strong dividend play that…

Read more »

Energy Stocks

TFSA Investors: A Rock-Solid Dividend Payer Yielding Over 5.4%

| Debra Ray

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) excites investors with a 5.38% dividend yield without the geopolitical risk of oil.

Read more »

Dividend Stocks

3 Top Stocks to Build a TFSA Pension

| Andrew Walker

Owning shares of Fortis Inc. (TSX:FTS)(NYSE:FTS) and two Canadian industry leaders can set you up with a low-maintenance stream of…

Read more »

Dividend Stocks

TFSA and RRSP Retirement Investors: 2 Canadian Banks to Buy and Hold for Decades

| Karen Thomas, MSc, CFA

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) are the two Canadian banks that offer the most for…

Read more »

Dividend Stocks

TFSA Investors: A Top Dividend Stock I’d Buy Today With an Extra $6,000

| Andrew Walker

Bank of Nova Scotia (TSX:BNS) (NYSE:BNS) appears oversold today and offers a safe dividend with an attractive yield.

Read more »

Dividend Stocks

3 Financial Stock Picks for July

| Ryan Vanzo

Want diversification benefits without sacrificing upside potential? Stocks like Manulife Financial Corporation (TSX:MFC)(NYSE:MFC) and Alaris Royalty Corp. (TSX:AD) deliver just…

Read more »

Dividend Stocks

TFSA Investors: Is Royal Bank of Canada (TSX:RY) Stock a Buy Right Now?

| Andrew Walker

Royal Bank of Canada (TSX:RY)(NYSE:RY) is Canada's largest company and continues to generate strong results, but there are risks to…

Read more »

Dividend Stocks

New Toronto-Dominion Bank (TSX:TD) ETFs to Stash in Your TFSA Retirement Fund

| Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has a few new "smart" ETFs up its sleeves.

Read more »

Bank Stocks

Bank of Montreal (TSX:BMO): An Undervalued Giant

| Vishesh Raisinghani

Unlike its peers, Bank of Montreal (TSX:BMO)(NYSE:BMO) seems better prepared for higher loan delinquencies and interest rates.

Read more »

Dividend Stocks

Should You Buy TD Bank (TSX:TD) or BMO (TSX:BMO) Stock for Your TFSA?

| Victoria Hetherington

Bank of Montreal (TSX:BMO)(NYSE:BMO) goes up against another Big Five banking stock for a place in an investor's TFSA.

Read more »

Dividend Stocks

2 Value Stocks You Can Set and Forget

| Christopher Liew, CFA

National Bank of Canada (TSX:NA) and TC Energy Corp. (TSX:TRP)(NYSE:TRP) are not only value stocks but high-dividend payers. You can…

Read more »

Dividend Stocks

New RRSP Investors: Should Toronto-Dominion Bank (TSX:TD) Stock Be in Your Portfolio?

| Andrew Walker

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is often cited as a top stock pick. Should you buy the bank for your RRSP today?

Read more »

Dividend Stocks

3 Banking Stock Picks for July

| Ryan Vanzo

Canada's banks sector, which includes giants like Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), has a proven history of resiliency and big…

Read more »

Dividend Stocks

Income Investors: 3 Top Dividend Stocks Yielding 5-6% for Your TFSA

| Andrew Walker

Canadian Imperial Bank of Commerce (TSX:CM) (NYSE:CM) and another two high-quality companies offer above-average yield and reasonably priced stocks today.

Read more »

Tech Stocks

Sell These 3 Top Stocks Now

| Ryan Vanzo

Well-known stocks are often assigned a popularity premium. That's bad news for investors of Laurentian Bank of Canada (TSX:LB), Shopify…

Read more »

Dividend Stocks

3 TSX Banking Stocks to Go All-In on and Never Look Back!

| Jason Phillips

Here are three Dividend Aristocrats from Canada’s financial sector that investors should feel very confident about, including Royal Bank of…

Read more »

Dividend Stocks

Banking on Yield: 2 TFSA-Worthy Banks With Yields of 5.5% to Buy Right Now

| Joey Frenette

CIBC (TSX:CM)(NYSE:CM) and another bank stock to buy if you crave yield.

Read more »

Dividend Stocks

TFSA Investors: Why You Should Buy Banking Stocks

| Stephanie Bedard-Chateauneuf, MBA

Stocks in the banking sector like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are ideal for a TFSA.

Read more »

Dividend Stocks

3 Top Dividend Stocks to Buy If You’re Investing for Retirement

| Haris Anwar

Fortis Inc. (TSX:FTS)(NYSE:FTS) is among 3 top dividend stocks that could be a great addition to any retirement 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.