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

The Motley Fool
Dividend Stocks

3 Cheap Dividend Stocks for TFSA Investors

| Victoria Hetherington

Transcontinental Inc. (TSX:TCL.A) and two other powerhouse stocks on the TSX index are currently great value for money and pay…

Read more »

Bank Stocks

1 Mortgage Lending Stock Is Upping its Game: Could This Hurt CIBC (TSX:CM) Stock?

| Brad Macintosh

Equitable Group Inc. (TSX:EQB) is nipping at the big bank’s toes, grabbing up Canadian mortgages at an alarming clip. What…

Read more »

The Motley Fool
Dividend Stocks

2 Dividend Stocks That Offer Value and Safety

| Kay Ng

Get growing dividends and double-digit upside potential from Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and another value stock today.

Read more »

grow your investments
Dividend Stocks

Young Investors: 2 Solid Stocks to Start Your Portfolio

| Stephanie Bedard-Chateauneuf, MBA

If you are a beginner investor, it is a good idea to start your portfolio by buying low-beta stocks such…

Read more »

Dividend Stocks

Is Now a Good Time to Be Making an Investment in Canada’s Banks?

| Jason Phillips

Last week, the Bank of Canada raised its benchmark interest rate for the fourth time in 12 months. Is now…

Read more »

Dividend Stocks

This Bank Is a Long-Term Income- and Growth-Generating Gem

| Demetris Afxentiou

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) remains the bank of choice for income-seeking investors thanks to an impressive growth strategy…

Read more »

Dividend Stocks

Help Identify the Best Stocks With These 3 Metrics

| Kay Ng

Here’s why Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and another stock are some of the best stocks to own for a long time.

Read more »

Dividend Stocks

The 5 Things You Need to Know From Last Week’s Bank of Canada Meeting

| Jason Phillips

Last week, the Bank of Canada met to discuss its outlook for the economy and interest rates. Here are five…

Read more »

Dividend Stocks

2 Blue Chips With Higher Than Average Growth Rates

| Mat Litalien, MBA

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Suncor Energy Inc. (TSX:SU)(NYSE:SU) have outperformed their peers and are expected to post higher than average…

Read more »

The Motley Fool
Bank Stocks

2 Reasons Toronto-Dominion Bank (TSX:TD) (USA) Stock Could Rise Above $80 This Summer

| Ambrose O'Callaghan

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is up in 2018 and there are many positives to glean as we look ahead to Q3…

Read more »

Bank Stocks

2 Stocks to Own in a Rising Interest Rate Environment

| Andrew Walker

Here's why Bank of Montreal (TSX:BMO)(NYSE:BMO) and another Canadian financial stock might be attractive picks today.

Read more »

Dividend Stocks

2 Canadian Bank Stocks That Provide the Best Value

| Mat Litalien, MBA

The Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) are trading below historical averages.

Read more »

Dividend Stocks

Bank of Nova Scotia (TSX:BNS) vs. Toronto-Dominion Bank (TSX:TD): Which Stock Is a Better Buy?

| Haris Anwar

Let's find out if Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) or Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a better buy for dividend investors.

Read more »

The Motley Fool
Bank Stocks

3 Bank Stocks to Bet on in the 2nd Half of 2018

| Ambrose O'Callaghan

Royal Bank of Canada (TSX:RY)(NYSE:RY) and other top Canadian banks could be well positioned for another summer and fall surge.

Read more »

Dividend Stocks

This Underperforming Bank Boasts Massive Growth Potential

| Demetris Afxentiou

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is trading down year to date, but the long-term prospects for the bank have never…

Read more »

Dividend Stocks

2 Top Bank Stocks to Buy As Interest Rates Continue to Rise

| David Jagielski

Another rate hike makes Toronto-Dominion Bank (TSX:TD)(NYSE:TD) an even more attractive buy.

Read more »

Bank Stocks

Profit From Pot Legalization by Buying Small Financial Firm Stocks

| Stephanie Bedard-Chateauneuf, MBA

Cannabis companies have been raising funds ahead of marijuana legalization, which benefit small financial firms like Canaccord Genuity Group Inc.…

Read more »

Dividend Stocks

Toronto-Dominion Bank (TSX:TD): A Top Stock Amid Rising Interest Rates

| Karen Thomas, MSc, CFA

As interest rates rise, investors can expect Toronto-Dominion Bank (TSX:TD) (NYSE:TD) to continue to drive strong earnings and dividend growth.

Read more »

The Motley Fool
Dividend Stocks

Top Dividend Stocks to Launch Your TFSA

| Haris Anwar

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is among the top dividend stocks to help build your TFSA wealth.

Read more »

The Motley Fool
Stocks for Beginners

Is Royal Bank of Canada (TSX:RY) or Canadian National Railway Company (TSX:CNR) Better for Your RRSP?

| Andrew Walker

Royal Bank of Canada (TSX:RY) (NYSE:RY) and Canadian National Railway (TSX:CNR) (NYSE:CNI) are two of Canada's top companies. Is one…

Read more »

The Motley Fool
Dividend Stocks

Is Bank of Nova Scotia (TSX:BNS) the Best Dividend Stock Right Now?

| Haris Anwar

Here is why Bank of Nova Scotia (TSX:BNS) (NYSE:BNS) is one of the best dividend stocks to own right now.

Read more »

The Motley Fool
Dividend Stocks

5 Top Canadian Blue-Chip Stocks to Buy and Hold

| Stephanie Bedard-Chateauneuf, MBA

You can benefit from stock appreciation and regular dividend income by buying stocks like Suncor Energy Inc. (TSX:SU)(NYSE:SU) and Enbridge…

Read more »

Dividend Stocks

2 Top Dividend Growth Stocks to Charge Your Retirement Income

| Haris Anwar

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is among the two dividend-growth stocks that could help you grow your retirement income fast.

Read more »

Dividend Stocks

5 Ultra-Cheap Stocks to Buy Right Now

| Stephanie Bedard-Chateauneuf, MBA

Are you looking for stocks that are trading at a bargain? I present five stocks that are very cheap, including…

Read more »

The Motley Fool
Dividend Stocks

A Top Canadian Dividend Stock That’s Selling at a Bargain

| Haris Anwar

Here is why I see good value in Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) stock, which, I believe, is ripe…

Read more »

Bank Stocks

Canadian Imperial Bank of Commerce (TSX:CM): An Undervalued Dividend-Growth Stock to Build TFSA Retirement Wealth?

| Andrew Walker

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) might be too cheap to ignore today.

Read more »

The Motley Fool
Dividend Stocks

3 Top Canadian Stocks for U.S. Exposure

| Andrew Walker

Bank of Montreal (TSX:BMO)(NYSE:BMO) and another two top Canadian stocks with strong U.S. operations deserve to be on your radar.

Read more »

The Motley Fool
Dividend Stocks

This 4-Stock Portfolio Screams Growth

| Demetris Afxentiou

Picking the right mix of investments can mean the difference between continuing to work or retiring in style. BCE Inc.…

Read more »

Dividend Stocks

Should You Buy Canadian or U.S. Bank Stocks?

| Kay Ng

Should you buy Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) or Bank of America Corp. (NYSE:BAC) right now?

Read more »

Dividend Stocks

Even if a Trade War Erupts, This Canadian Bank Remains a Top Investment

| Matt Smith

Invest in Toronto-Dominion Bank (TSX:TD)(NYSE:TD) for long-term growth and to benefit from a stronger U.S. economy.

Read more »

Dividend Stocks

Which Is the Better Buy: Bank of Nova Scotia (TSX:BNS) or Laurentian Bank of Canada (TSX:LB)?

| Kay Ng

Depending on your goals, you might want to buy Laurentian Bank of Canada (TSX:LB) over Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

Read more »

The Motley Fool
Dividend Stocks

2 Top Stocks to Buy and Hold in Your TFSA

| Haris Anwar

Here is why Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is one of the two top dividend stocks to buy for your…

Read more »

The Motley Fool
Dividend Stocks

Should You Buy Bank of Nova Scotia (TSX:BNS) on the Weakness?

| Kay Ng

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) should work well as a stable long-term holding for income and income growth.

Read more »

Bank Stocks

3 Stocks That Could Ride a TSX Surge in the Second Half of 2018

| Ambrose O'Callaghan

The TSX may be poised for a rally in the latter half of 2018 and it could be powered by…

Read more »

Dividend Stocks

5 Dividend Stocks Yielding Over 5%

| Stephanie Bedard-Chateauneuf, MBA

If you're hungry for dividends, you will be satisfied with these five stocks, which include BCE Inc. (TSX:BCE)(NYSE:BCE).

Read more »

The Motley Fool
Dividend Stocks

Why TD Bank (TSX:TD) Stock Is an International Gem

| Chris MacDonald

Here are two reasons why Toronto-Dominion Bank's (TSX:TD)(NYSE:TD) international strategy is going to continue to pay off over the long-term for…

Read more »

Dividend Stocks

Retirement Savers: Should Royal Bank of Canada Be in Your TFSA?

| Andrew Walker

Royal Bank of Canada (TSX:RY) (NYSE:RY) has pulled back from the 2018 highs. Is it time to buy?

Read more »

Dividend Stocks

2 Top Dividend Growth Stocks to Buy Now

| Haris Anwar

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is one of the two top dividend stocks that income investors should consider to buy now.

Read more »

Dividend Stocks

2 Canadian Stocks to Take Advantage of an Upcoming Bank of Canada Interest Rate Hike

| Chris MacDonald

Why Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and Shopify Inc. (TSX:SHOP)(NYSE:SHOP) are two of my top picks to battle rising interest rates…

Read more »

Dividend Stocks

Ranking Canada’s Big 5 Banks by Year-Ahead Upside Potential

| Joey Frenette

From Toronto-Dominion Bank (TSX:TD)(NYSE:TD) to Royal Bank of Canada (TSX:RY)(NYSE:RY), here's the best bank for your buck!

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.