Why invest in bank stocks?

<h2>Why invest in bank stocks?</h2> <p><span style="font-weight: 400">Quality bank stocks have a strong history of generating profits and managing crises, making them a great investment.</span></p> <p>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.</p> <p>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.</p>

Bank Stocks News

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.

Related: A list of stocks in Canada’s financial sector, which includes bank stocks

[KevelPitch adtype=151]

Check back here for the most up to date information about bank stocks in Canada.

Recent Bank Stocks News

Dividend Stocks

Will There Be a Canadian Housing Market Meltdown in 2019?

April 12, 2019 | Kay Ng

Should you be worried about your holdings in Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and other Canadian banks?

Become a TFSA Millionaire With BCE Inc. (TSX:BCE) and Bank of Montreal (TSX:BMO)

April 12, 2019 | Nelson Smith

You don't need to invest in great stocks like BCE Inc. (TSX:BCE)(NYSE:BCE) and Bank of Montreal (TSX:BMO)(NYSE:BMO) to become a…

Attention Wealth Builders: 2 Top TSX Index Stocks That Have Made Investors Rich

April 12, 2019 | Andrew Walker

Canadian National Railway (TSX:CNR)(NYSE:CNI) and another TSX Index industry leader have generated impressive long-term returns. Here's how.

Top 4 Stocks to Add to Your Portfolio This Spring

April 12, 2019 | Mat Litalien, MBA

Now is the time to add quality stocks such as Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Canada Goose Holdings Inc (TSX:GOOS)(NYSE:GOOS).

Could This Be the Most Underrated Bank Stock on the TSX?

April 12, 2019 | Christopher Liew, CFA

The Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is set to allay investor apprehension about its reliance on the domestic mortgage…

3 TSX Dividend Stocks Every Canadian Retiree Should Be Considering for their RRSP

April 12, 2019 | Jason Phillips

These top TSX dividend stocks offer retirees a careful balance of income and growth, including Royal Bank of Canada (TSX:RY)(NYSE:RY)…

Royal Bank of Canada (TSX:RY): 1 of the Best Dividend Stocks to Buy

April 11, 2019 | Haris Anwar

Here is why Royal Bank of Canada (TSX:RY)(NYSE:RY) is one of the best dividend stocks to own.

Is it Time to Sell Canadian Banks?

April 11, 2019 | Kris Knutson

The Canadian banking sector, Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) included, is facing scrutiny from American short-sellers. Is it time…

5 Unbelievable Facts About the Toronto Real Estate Market

April 11, 2019 | Nelson Smith

The Toronto real estate market continues to defy gravity. Should this make you a bull on Home Capital Group Inc.…

Shorting Canada’s Banks: Where Hedge Funds Go to Lose Money

April 11, 2019 | Matt Smith

Ignore the short-sellers and buy Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Bank of Novia Scotia (TSX:BNS)(NYSE:BNS).

5 Dividend Stocks to Start a TFSA Retirement Portfolio

April 11, 2019 | Andrew Walker

Here's why Bank of Montreal (TSX:BMO) (NYSE:BMO) and another four top Canadian dividend stocks deserve to be on your TFSA…

Why Toronto-Dominion Bank (TSX:TD) Is 1 Stock You Can Own Forever

April 11, 2019 | Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) keeps on future-proofing itself. Here's why the rise of fintech disruptors may actually work in favour of…

Recession Investors: 2 Stocks to Buy and 2 to Drop

April 11, 2019 | Victoria Hetherington

Hudson’s Bay Co. (TSX:HBC) and one other related stock are buys at the moment, while investors may want to ease…

Are Short-Sellers Making Toronto Dominion Bank (TSX:TD) Stock Cheap?

April 11, 2019 | Andrew Button

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is attracting a lot of short interest... Does this make the stock an undervalued bargain?

Marijuana’s Next Ally? Look No Further Than the Big Six

April 11, 2019 | Victoria Hetherington

Stocks like Canopy Growth Corp (TSX:WEED)(NYSE:CGC) may have unlikely allies in some of Canada’s biggest Bay Street bankers.

Regional Banks or Canada’s Big Five Banks: Which One Is the Better Buy?

April 11, 2019 | Mat Litalien, MBA

Canada's regional banks offer better value than Canada's big banks. Laurentian Bank of Canada (TSX:LB) and Canadian Western Bank (TSX:CWB)…

TFSA Investors: 2 Top Dividend Stocks to Buy and Forget

April 11, 2019 | David Jagielski

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and this other stock are solid long-term buys that you can build your portfolio around.

TFSA Investors: This Bank Is a Top Investment for 2019

April 10, 2019 | Demetris Afxentiou

Long-term investors searching for an investment that can provide diversified growth and an impressive dividend that continues to see annual…

TFSA Tax-Refund Showdown: Which Stock Should You Buy?

April 10, 2019 | Kris Knutson

Using your 2019 tax return in your TFSA can be a tax-efficient way to buy stocks like Bank of NovaScotia…

WARNING: New Report Suggests a Recession Could Be Coming

April 10, 2019 | Andrew Button

A new report out of Ottawa has some worrying that a recession is on the horizon. Could stocks like Royal…

Income Investors: Why I’d Back Up the Truck on CIBC (TSX:CM) Despite Bank Headwinds

April 10, 2019 | Joey Frenette

CIBC (TSX:CM)(NYSE:CM) is a battered bank that's worth picking up on the broader dip in the financials.

5 Unbelievable Facts About The Vancouver Real Estate Market

April 10, 2019 | Nelson Smith

You won't believe what's happening in the Vancouver property market, and Canadian Western Bank (TSX:CWB) is right in the middle…

Despite Headwinds, Canadian Banks like Toronto-Dominion Bank (TSX:TD) Should Remain Key Holdings in Your RRSP

April 10, 2019 | Karen Thomas, MSc, CFA

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) remains the top Canadian bank for RRSP investors, while Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) remains the…

Attention Income Investors: 2 High-Yield Stocks to Own for Decades

April 10, 2019 | Andrew Walker

Here's why BCE Inc. (TSX:BCE)(NYSE:BCE) and one other high-yield Canadian stock deserve to be on your income radar.

3 Reasons to Buy and Forget Manulife Financial (TSX:MFC)

April 9, 2019 | Demetris Afxentiou

Manulife Financial Corporation (TSX:MFC)(NYSE:MFC) has long been regarded as a viable long-term investment option, but few investors may realize just…

Attention Millennial Couples: How to Turn a $100,000 TFSA into $1 Million

April 9, 2019 | Andrew Walker

Here's how using a self-directed TFSA to hold dividend stocks such as Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and Fortis Inc.…

Inject Some Income Into Your TFSA With These 3 Dividend Studs

April 9, 2019 | Andrew Button

Dividend stocks like Royal Bank of Canada (TSX:RY)(NYSE:RY) can inject income into your TFSA whether the market goes up or…

Millennials: How to Get to $1,000,000 by Retirement

April 9, 2019 | David Jagielski

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a great stock to hold for the long term that can accumulate a lot of income for…

Dividend Stocks

Warren Buffett Is Betting Big on Bank Stocks: Should You?

April 9, 2019 | Andrew Button

With Warren Buffett betting big on U.S. bank stocks, is now the time to bet on Canadian banks with U.S.…

Short-Sellers Betting Against Toronto-Dominion Bank (TSX:TD) Will Lose

April 8, 2019 | Matt Smith

Ignore the short-sellers and buy Toronto-Dominion Bank (TSX:TD)(NYSE:TD) for growth and its dividend.

Will These 2 Bank Stocks Finish Above $100 in 2019?

April 8, 2019 | Ambrose O'Callaghan

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are thriving above the $100 mark in 2019. Are harsher…

1 Top Bank Stock Yielding +4% That Belongs in Every TFSA

April 8, 2019 | Matt Smith

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is attractively valued and poised to unlock considerable value for long-term investors.

2 Timely Dividend Buys for Your Passive-Income Fund

April 8, 2019 | Joey Frenette

Buy Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and one other reliable dividend stock for your TFSA income fund.

Investors Beware: Toronto-Dominion (TSX:TD) Isn’t What It Used to Be

April 7, 2019 | Amy Legate-Wolfe

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) may be one of Canada's biggest banks, but if a recession hits this bank may have a…

3 Tricks to Maximize Your RRSP Portfolio Value

April 7, 2019 | Ryan Vanzo

Whether you're investing in growth stocks like Canada Goose Holdings Inc (TSX:GOOS)(NYSE:GOOS) or stable dividend payers like Bank of Nova Scotia (TSX:BNS)(NYSE:BNS),…

Should Toronto-Dominion Bank (TSX:TD) or CIBC (TSX:CM) Stock Be on Your Buy List Today?

April 7, 2019 | Andrew Walker

Toronto Dominion Bank (TSX:TD)(NYSE:TD) and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) are off their recent highs. Is one now a…

Better Buy for Your TFSA: Bank of Nova Scotia (TSX:BNS) or Toronto-Dominion Bank (TSX:TD)?

April 6, 2019 | Prosper Bakiny

Bank of Nova Scotia (TSX:BNS) (NYSE:BNS) and Toronto-Dominion Bank (TSX:TD) (NYSE:TD) are both interesting options for dividend investors, but which…

Avoid These Big Mistakes in Your TFSA

April 6, 2019 | Kay Ng

Find out why it won’t be a mistake to invest in Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock in your TFSA for the…

3 Reasons Why Bank of Montreal (TSX:BMO)(NYSE:BMO) Is a Top Choice in the Face of a Recession

April 6, 2019 | Christopher Liew, CFA

The prospects of recession will spook investors every time but Bank of Montreal (TSX:BMO)(NYSE:BMO) will always be a solid countermeasure…

2 Core Growth Stocks for Your TFSA

April 5, 2019 | Kris Knutson

TFSA investors need a combination of capital appreciation and dividend growth that companies like Toronto Dominion Bank (TSX:TD)(NYSE:TD) can provide…

❮1…150 151152153 154…❯

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.