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

TFSA Investors: 2 Dividend-Growth Stocks to Earn a Hike up to 10%

| Haris Anwar

TransCanada Corporation (TSX:TRP)(NYSE:TRP) is among the top dividend-growth stocks that TFSA investors should consider adding to their retirement portfolios.

Read more »

Dividend Stocks

How Much Are You Saving for Retirement?

| Kay Ng

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is a great stock for holding through retirement.

Read more »

The Motley Fool
Bank Stocks

Toronto-Dominion Bank Slips Under $70 in April: 3 Reasons to Buy Today

| Ambrose O'Callaghan

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock is offering up enticing value in the month of April.

Read more »

Dividend Stocks

Which Income Stock Is a Better Buy? Toronto Dominion Bank vs. Royal Bank of Canada

| Karen Thomas, MSc, CFA

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Royal Bank of Canada (TSX:RY)(NYSE:RY) have both fallen from their highs yet are reporting strong results…

Read more »

dividends
Dividend Stocks

Enbridge Inc. vs. Bank of Montreal: Which Top Dividend Stock Would I Buy Today?

| Haris Anwar

Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are two top dividend stocks in Canada. Let's find out which is…

Read more »

Dividend Stocks

1 Bank That’s Future-Proofing With AI and Blockchain Technology

| Joey Frenette

Here's why Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a tech-embracing stock that's a must-buy for investors looking to future-proof their portfolios with…

Read more »

The Motley Fool
Bank Stocks

Why Is This Warren Buffett Stock Sinking?

| Haris Anwar

Home Capital Group Inc. (TSX:HCG), a Canadian mortgage lender rescued by Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) last year, is…

Read more »

The Motley Fool
Bank Stocks

Bank of Nova Scotia Stock: Has the Price Drop Gone Too Far?

| Andrew Walker

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) might be an attractive pick today. Here's why.

Read more »

Dividend Stocks

Diversify Your Portfolio With Manulife Financial Corporation

| Demetris Afxentiou

Manulife Financial Corporation (TSX:MFC)(NYSE:MFC) offers investors growth and income-producing potential that is not dependent on the saturated Canadian insurance market.

Read more »

caution
Bank Stocks

Why Now Is Not a Good Time to Be Investing in Lending Companies

| David Jagielski

A concerning report by Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) may have you re-thinking about investing in banks and other financial…

Read more »

The Motley Fool
Dividend Stocks

An Options Strategy That Can Help You Add Yield While Reducing Your Risk

| Jason Phillips

Find out how to use a covered-call strategy in your trading account to help generate a little additional yield on…

Read more »

The Motley Fool
Dividend Stocks

Toronto-Dominion Bank: Time to Buy This Top Canadian Dividend Stock?

| Andrew Walker

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has pulled back from the 2018 highs in the past month. Is this stock on sale right…

Read more »

think, plan, and act to work towards your financial goals
Dividend Stocks

Canadian Imperial Bank of Commerce vs. National Bank of Canada: Which Cheap Bank Is the Better Value?

| Joey Frenette

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and National Bank of Canada (TSX:NA) go head to head for the title of…

Read more »

Bank Stocks

Royal Bank of Canada Stock: Should You Buy at the Current Price?

| Andrew Walker

Royal Bank of Canada (TSX:RY)(NYSE:RY) has pulled back in the past three months. Is it getting oversold?

Read more »

Dividend Stocks

This Bank Is a Buy-and-Forget Favourite

| Demetris Afxentiou

Investors looking for growth and income potential should consider including Toronto-Dominion Bank (TSX:TD)(NYSE:TD) in their portfolios.

Read more »

Dividend Stocks

Canadian Imperial Bank of Commerce Is a Buy … But Where Is the Bottom?

| Ryan Goldsman

With downward momentum, shares of Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) are approaching their bottom once again.

Read more »

The Motley Fool
Dividend Stocks

As Interest Rates Rise, Shore Up Your Portfolio With These Financials Stocks

| Karen Thomas, MSc, CFA

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is but one financial stock that is in for good times ahead.

Read more »

Bank Stocks

3 Reasons Investors Should Load Up on Canadian Bank Stocks Today

| Ambrose O'Callaghan

Royal Bank of Canada (TSX:RY)(NYSE:RY) and other Canadian banks could be attractive buys, as stocks have struggled to start 2018.

Read more »

Dividend Stocks

Looking Behind the Curtain for Value

| Ryan Goldsman

With more room to grow, investors may want to take a good look at Canada's regional banks, such as Canadian…

Read more »

The Motley Fool
Dividend Stocks

TFSA Investors: A Top Dividend-Growth Stock to Buy Today

| Haris Anwar

Here is why Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is a top dividend-growth stock for your TFSA.

Read more »

Dividend Stocks

How to Beat the Market Like Warren Buffett

| Neha Chamaria

Warren Buffett’s style of investing explains why Canadian National Railway (TSX:CNR)(NYSE:CNI) and Bank of Montreal (TSX:BMO)(NYSE:BMO) have been multi-bagger stocks.

Read more »

Dividend Stocks

2 Top Canadian Dividend Stocks to Buy in a Volatile Market

| Haris Anwar

Here is why Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and one other stock are top dividend names for long-term investors.

Read more »

The Motley Fool
Dividend Stocks

3 Top Canadian Stocks to Own for Decades

| Andrew Walker

Here's why Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and another two top Canadian stocks deserve to be on your buy-and-hold radar.

Read more »

Dividend Stocks

3 Tips to Help You Avoid Losing Your Shirt in the Next Market Meltdown

| Jason Phillips

The S&P 500 shed more than 10% of its value in fewer than two weeks between January and February. Find…

Read more »

The Motley Fool
Dividend Stocks

Is it Time to Buy Bank of Nova Scotia Stock?

| Andrew Walker

Bank of Nova Scotia (TSX:BNS) (NYSE:BNS) trades at a discount to its larger peers. Is this a buying opportunity?

Read more »

Dividend Stocks

This Bank Is Canada’s Best

| Mat Litalien, MBA

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is the best bank to buy today. Its a triple threat that offers growth,…

Read more »

Dividend Stocks

Toronto-Dominion Bank vs. Bank of Nova Scotia: Best Bank for Your Buck?

| Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) are two attractive value picks today, but which is the better…

Read more »

Dividend Stocks

TFSA Investors: 3 Blue-Chip Bank Stocks That Are on the Verge of Being Oversold

| David Jagielski

Royal Bank of Canada (TSX:RY)(NYSE:RY) and these two other stocks are trading at bargains you don't want to miss.

Read more »

The Motley Fool
Dividend Stocks

Toronto-Dominion Bank Stock Falls 8% in 15 Trading Days: Time to Buy?

| Brian Paradza, CFA

Rich pickings are available as Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock goes into oversold territory.

Read more »

Dividend Stocks

Should Bank of Montreal Be on Your RRSP Buy List?

| Andrew Walker

Bank of Montreal (TSX:BMO) (NYSE:BMO) is often overlooked by investors. Is it time to buy this stock?

Read more »

Bank Stocks

Is This Stock a Deep-Value Opportunity Poised to Outperform the Market?

| Matt Smith

Home Capital Group Inc. (TSX:HCG) is trading at a steep discount to its book value.

Read more »

Bank Stocks

Will a Slowing Economy Continue to Drag Down the Top 2 Canadian Bank Stocks?

| Ambrose O'Callaghan

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and another stock have been dragged down due to a suffering Canadian market.

Read more »

Bank Stocks

2 Reasons Royal Bank of Canada Is Not the Bank Stock to Own

| Will Ashworth

Royal Bank of Canada (TSX:RY)(NYSE:RY) CEO Dave McKay thinks investment capital is fleeing the country. Here are two reasons why…

Read more »

Dividend Stocks

Where Investors Can Find International Exposure

| Ryan Goldsman

With a fluctuating Canadian dollar, investors may be wise to load up on shares of Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

Read more »

Dividend Stocks

Dividend Investors: 2 Leading Canadian Stocks to Buy Today

| Haris Anwar

Investing in quality dividend stocks, such as Royal Bank of Canada (TSX:RY)(NYSE:RY), is a safe way for new investors to…

Read more »

The Motley Fool
Dividend Stocks

Bank of Nova Scotia: The Best Positioned Canadian Bank for Growth

| Matt Smith

Diversify internationally by investing in Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

Read more »

The Motley Fool
Dividend Stocks

Another Great Year for Bank of Nova Scotia

| Jason Phillips

2017 marked another strong showing for Bank of Nova Scotia (TSX:BNS)(NYSE:BNS). Find out about the three factors driving the company’s…

Read more »

Bank Stocks

Ignore the Short-Sellers and Buy Toronto-Dominion Bank

| Matt Smith

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) possesses solid growth prospects.

Read more »

The Motley Fool
Bank Stocks

2 Quebec-Based Banks to Consider Adding in April

| Ambrose O'Callaghan

Bank of Montreal (TSX:BMO)(NYSE:BMO) and National Bank of Canada (TSX:NA) could offer great value to investors after a difficult start…

Read more »

Dividend Stocks

TFSA Investors: The 5 Top Value Stocks to Outperform the Market in April

| Jason Phillips

With RRSP season behind us, its time to resume contributions to your TFSA. Consider adding these blue-chip holdings to your…

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.