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

Dividend Stocks

Forget the Big Five and Invest in National Bank of Canada (TSX:NA)

| Demetris Afxentiou

National Bank of Canada (TSX:NA) is often overlooked by investors for its larger peers, but investors would do well to…

Read more »

The Motley Fool
Dividend Stocks

Retirement Investors: These 3 Stocks Pay Up to 9.25% Dividends

| Victoria Hetherington

Retirement investors have a treat in store with this list of high-yield dividend stocks such as Laurentian Bank of Canada…

Read more »

Dividend Stocks

Is Sun Life Financial Inc. (TSX:SLF) Stock About to Heat Up as Interest Rates Rise?

| Joey Frenette

Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF) looks like a great bet as rates rise, but is it a buy at these…

Read more »

Dividend Stocks

A Critical Glance at 3 Big Bank Stocks on the TSX Index

| Victoria Hetherington

Is The Toronto-Dominion Bank (TSX:TD)(NYSE:TD) the best value financial stock on the TSX today? Or do these two competitors beat…

Read more »

Dividend Stocks

These 3 Words Could Cost Canadian Investors Millions

| Victoria Hetherington

Buying stocks like Toronto-Dominion Bank (TSX:TD)(NYSE:TD) could protect your money from a worrying trend in the U.S.

Read more »

Bank Stocks

3 Things You Should Do If You Really Want to Beat the Market

| David Jagielski

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has outperformed the TSX over the past decade by a wide margin.

Read more »

Dividend Stocks

You’ll Never Guess How Many Millennials Don’t Own Stocks

| Victoria Hetherington

Here’s why millennials are so scared of owning stocks, and why Canopy Growth Corp. (TSX:WEED)(NYSE:CGC) might be a good choice.

Read more »

Dividend Stocks

2 Strategic Stocks for Your Financials Portfolio

| Victoria Hetherington

Home Capital Group Inc. (TSX:HCG) and one other financial stock offer two very different investing strategies. Which one would suit…

Read more »

Dividend Stocks

Is Manulife Financial Corp. (TSX:MFC) About to Take a Dip?

| Joey Frenette

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) has been a tough stock to own for investors. Here's why it may be time to…

Read more »

Dividend Stocks

Why This Dividend Stock Is the Best Candidate for Your Retirement Income

| Haris Anwar

Here is why Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is one of the best dividend-growth stocks to boost your retirement income.

Read more »

Bank Stocks

This Could Cause Canadian Bank Stocks to Soar in the Coming Years

| Ambrose O'Callaghan

Corporate leaders are pushing for Canadian tax reform which could greatly benefit stocks like Royal Bank of Canada (TSX:RY)(NYSE:RY) and…

Read more »

Bank Stocks

On the Hunt for Income? Add Canadian Imperial Bank of Commerce (TSX:CM) Stock to Your Portfolio Today

| Ambrose O'Callaghan

Investors seeking a high yield should look to Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) ahead of its third-quarter earnings report.

Read more »

Senior couple at the lake having a picnic
Dividend Stocks

2 Canadian Dividend Stocks to Help You Retire at the Cottage

| Andrew Walker

Here's why Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and a contrarian dividend pick might be attractive bets today.

Read more »

Dividend Stocks

VersaBank (TSX:VB): A Small Canadian Bank Worth Looking Into

| Kris Knutson

VersaBank (TSX:VB) is a small Canadian bank that is growing earnings and book value quickly. The company pays a small…

Read more »

Dividend Stocks

Retirement Income: 2 Dividend Stocks to Buy to Get Higher Returns

| Haris Anwar

Manulife Financial Corporation (TSX:MFC)(NYSE:MFC) is one of two dividend stocks that could improve your retirement income.

Read more »

The Motley Fool
Bank Stocks

Stay Away From CIBC (TSX:CM) Stock Unless You Like These Kinds of Dividends

| Victoria Hetherington

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) looks undervalued today. But do the value ratios back up CIBC stock’s dividend?

Read more »

Bank Stocks

Big Tech vs. Canadian Banks: Who Will Win?

| Christopher Liew, CFA

Royal Bank of Canada (TSX:RY)(NYSE:RY) won't be left behind by Big Tech.

Read more »

Dividend Stocks

Should You Buy Canadian Imperial Bank of Commerce (TSX:CM) or Imperial Oil Ltd. (TSX:IMO)?

| Andrew Walker

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and Imperial Oil Ltd. (TSX:IMO)(NYSE:IMO) have histories dating back to the 1800s. Is one…

Read more »

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 »

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.