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

Retirement Income: Which Canadian Bank Stock Offers Better Value?

| Haris Anwar

Here is why Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) offers better value for your retirement income portfolio after the recent…

Read more »

Dividend Stocks

RRSP Investors: 3 Top Stocks to Get International Exposure and Reliable Dividends

| Andrew Walker

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and another two companies are attractive picks to tap growth beyond Canada.

Read more »

Energy Stocks

Is Suncor Energy Inc. or Toronto-Dominion Bank Better for Your RRSP Right Now?

| Andrew Walker

Suncor Energy Inc. (TSX:SU)(NYSE:SU) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are two of Canada's top stocks. Is one an attractive RRSP pick?

Read more »

The Motley Fool
Dividend Stocks

Bank of Nova Scotia Makes a Big Push Into Wealth Management

| Jason Phillips

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) made a big splash this week when it acquired one of Canada's largest and most…

Read more »

The Motley Fool
Dividend Stocks

3 New Reasons to Buy Bank of Nova Scotia NOW

| Demetris Afxentiou

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) announced a second acquisition this week for a renowned investment firm that will propel the…

Read more »

time is money compounding
Dividend Stocks

RRSP Investors: 2 Top Dividend Stocks to Buy Right Now

| Haris Anwar

Bank of Montreal (TSX:BMO)(NYSE:BMO) and one other top dividend stock offer an attractive entry point to RRSP investors. Should you…

Read more »

Dividend Stocks

3 Great Investments Are on Sale Right Now

| Demetris Afxentiou

The recent market correction has given investors an opportunity to buy several great investments, such as Bank of Nova Scotia…

Read more »

Dividend Stocks

Bargain Hunting: Is This Market Sell-Off Just What You’ve Been Waiting for?

| Karen Thomas, MSc, CFA

SIerra Wireless, Inc. (TSX:SW)(NASDAQ:SWIR) is one of many bargains to be had in this market sell-off.

Read more »

Dividend Stocks

How to Get to $1,000,000 by Retirement Even if You Have $0 in Savings Today

| David Jagielski

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is a great blue-chip stock that you can build a good retirement with.

Read more »

Bank Stocks

2 Foolish Stocks I’d Buy in This Sea of Red

| Mat Litalien, MBA

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and Power Financial Corp. (TSX:PWF) are great buys today.

Read more »

The Motley Fool
Dividend Stocks

The TSX Is Plummeting: Is it Time to Sell or Buy More?

| Jason Phillips

Following a great run in 2017, markets have been hit badly to start the year. Find out if you should…

Read more »

Dividend Stocks

How Is the Former CEO of Toronto-Dominion Bank Getting Involved in Canada’s Marijuana Industry?

| Jason Phillips

Ed Clark was recently tapped to oversee Ontario's distribution of recreational marijuana. Is the man who privatized Hydro One Ltd…

Read more »

Bank Stocks

Should You Load Up on Bank Stocks Ahead of Earnings Season?

| Ambrose O'Callaghan

After a dip in the TSX, stocks such as Bank of Montreal (TSX:BMO)(NYSE:BMO) could be a bargain before Q1 earnings.

Read more »

The Motley Fool
Bank Stocks

Don’t Ignore Bank of Nova Scotia and its Latest Acquisitions

| Matt Smith

Boost your exposure to emerging markets from the safety of Canada by investing in Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

Read more »

The Motley Fool
Bank Stocks

The Market Is in Reset Mode! Scoop Up a Bargain in This Unfairly Beaten-Up Industry Today

| Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a great bank stock, but it was one of the most punished blue-chip Canadian names during…

Read more »

The Motley Fool
Dividend Stocks

A Defensive Canadian Stock to Buy During Market Volatility

| Haris Anwar

Here is why Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a great Canadian stock to buy when markets are tanking.

Read more »

Dividend Stocks

Now This Looks More Like a Healthy Stock Market

| Kay Ng

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and another dividend stock are good buys for long-term investors.

Read more »

The Motley Fool
Dividend Stocks

3 Blue-Chip Stocks That Are Oversold and Great Buys Today

| David Jagielski

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and these two other stocks have recently hit oversold territory, and it could be a…

Read more »

Bank Stocks

You Need to Sell These Stocks Right Away Before the Market Plunges Further!

| Neha Chamaria

Stocks such as BCE Inc. (TSX:BCE)(NYSE:BCE) and two others teach you investing lessons.

Read more »

Dividend Stocks

Cannabis Investors: These 2 Financials Stocks Provide Sector Exposure With Less Risk

| Chris MacDonald

Why Canaccord Genuity Group Inc. (TSX:CF) and GMP Capital Inc. (TSX:GMP) may be a less risky and more profitable play for investors looking…

Read more »

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

3 Risk Factors Every Canadian Investor Must Consider With Canada’s Big Banks

| Chris MacDonald

Based on these three headwinds, I believe better options than Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) may be out there right now…

Read more »

Dividend Stocks

Start Your TFSA With These 3 Safe Dividend Stocks

| Haris Anwar

Starting your TFSA retirement fund with safe dividend stocks such as Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is a good strategy for…

Read more »

The Motley Fool
Dividend Stocks

Which Stocks Will Be the Hardest Hit as Bond Yields Rise?

| Karen Thomas, MSc, CFA

Cannabis stocks like Canopy Growth Corp. (TSX:WEED) will be among the hardest hit, and financials such as Manulife Financial Corporation…

Read more »

The Motley Fool
Dividend Stocks

Canadian Investors Looking for Exposure to U.S. Tax Cuts Need to Consider This 1 Company

| Chris MacDonald

Why Toronto-Dominion Bank (TSX:TD)(NYSE:TD) remains a top pick of mine for Canadian investors looking for exposure to U.S. tax cuts.

Read more »

The Motley Fool
Dividend Stocks

Bank of Nova Scotia: 2 Reasons to Own This Top Dividend Stock Now

| Haris Anwar

Here is why Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is a top dividend stock you shouldn't ignore.

Read more »

The Motley Fool
Dividend Stocks

Retired? These 3 Income-Producing Stocks Will Help You Sleep at Night

| Jason Phillips

These three companies, including Enbridge Inc. (TSX:ENB)(NYSE:ENB), strike a careful balance between dividend yields above 4% and low-risk businesses with…

Read more »

Dividend Stocks

2 Top Dividend Stocks You Should Keep in Your TFSA Forever

| Haris Anwar

Fortis Inc. (TSX:FTS)(NYSE:FTS) is a top dividend stock which deserves to be in your TFSA.

Read more »

Dividend Stocks

Toronto-Dominion Bank: Time to Take Profits or Is More Growth on the Horizon?

| Jacob Donnelly

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a great investment that should continue to grow, so taking profits isn't advisable.

Read more »

Dividend Stocks

2 Undervalued Dividend Stocks to Add to Your TFSA

| David Jagielski

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and this other dividend stock have great prospects for long-term growth.

Read more »

Stocks for Beginners

A Top Canadian Dividend Stock to Start Your TFSA Pension Fund

| Andrew Walker

Here's how investing in top stocks such as Royal Bank of Canada (TSX:RY)(NYSE:RY) can help you save a substantial pile…

Read more »

The Motley Fool
Dividend Stocks

2 Top Value Stocks to Buy for 2018

| Karen Thomas, MSc, CFA

Industrial Alliance Insur. & Fin. Ser. (TSX:IAG) and OceanaGold Corporation (TSX:OCG) are two solid, well-run companies trading at attractive valuations.

Read more »

Bank Stocks

After Dropping More Than 12% in Less Than Two Months, Is Laurentian Bank of Canada a Buy?

| Chris MacDonald

After announcing $392 million in problematic mortgages, is Laurentian Bank of Canada (TSX:LB) a good long-term hold given its 12% valuation…

Read more »

Dividend Stocks

It’s Time to Buy This Canadian Bank That’s Doubled Down on AI

| Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and its recent tech investments are yet another reason why the stock deserves a premium multiple over…

Read more »

Bank Stocks

Royal Bank of Canada: Is Further Growth on the Horizon?

| Jacob Donnelly

Royal Bank of Canada (TSX:RY)(NYSE:RY) continues to deliver strong results.

Read more »

The Motley Fool
Dividend Stocks

Enbridge Inc. vs. Toronto-Dominion Bank: Which Stock Is a Better Buy for a TFSA?

| Haris Anwar

Find out if Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are good buys for your TFSA in 2018.

Read more »

Dividend Stocks

TFSA Investors: 4 Dividend Stocks That Could Be About to Raise Their Payouts

| David Jagielski

Earnings season is around the corner, and dividend investors will want to keep a close eye on BCE Inc. (TSX:BCE)(NYSE:BCE) and…

Read more »

The Motley Fool
Dividend Stocks

Is Laurentian Bank of Canada a Home Capital Group Inc. 2.0?

| Chris MacDonald

Will Laurentian Bank of Canada (TSX:LB) have a Home Capital Group Inc. (TSX:HCG) style rebound or continue to decline, as investors weigh…

Read more »

Dividend Stocks

Beat the Market Over the Long Haul With This Top Bank Stock

| Joey Frenette

Why Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is one stock you'll want to own for the next five years.

Read more »

Bank Stocks

Forget Cannabis and Bitcoin! Buy These 3 TSX-Traded Emerging Market Stocks Instead

| Joey Frenette

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and two other emerging market gems to consider if you want to beef up your…

Read more »

Bank Stocks

Going Rate for Cannabis Talent: $5-21 Million Per Employee

| Chris MacDonald

Cannabis farmers are now rivaling world-class machine-learning and artificial intelligence employees in terms of value, according to the recent Broken…

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.