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

Evaluating Canada’s Banks: Bank of Nova Scotia

| Ryan Goldsman

In an attempt to evaluate Canada's banks, we look at Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

Read more »

The Motley Fool
Bank Stocks

Toronto-Dominion Bank Down Over 7% Since March: Worth a Buy?

| Jacob Donnelly

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has given up value due to bad press. Take advantage of this and load up on cheaper…

Read more »

Dividend Stocks

Evaluating Canada’s Banks: Bank of Montreal

| Ryan Goldsman

In an attempt to evaluate Canada's banks, we look at Bank of Montreal (TSX:BMO)(NYSE:BMO).

Read more »

The Motley Fool
Dividend Stocks

Bank of Nova Scotia: Canada’s International Bank

| Demetris Afxentiou

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) offers investors the lucrative opportunity to invest in the growing markets of Latin America.

Read more »

Bank Stocks

Better Buy: Royal Bank of Canada vs. Canadian Imperial Bank of Commerce

| Joey Frenette

Bank stocks are a great buy on the dip. Should you consider Royal Bank of Canada (TSX:RY)(NYSE:RY) or Canadian Imperial…

Read more »

Dividend Stocks

Young Savers: 4 Top Dividend Stocks for Your TFSAs

| Haris Anwar

Stocks such as Royal Bank of Canada (TSX:RY)(NYSE:RY) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) are great picks for your TFSA.

Read more »

Dividend Stocks

Evaluating Canada’s Banks: Canadian Imperial Bank of Commerce

| Ryan Goldsman

In an attempt to evaluate Canada's banks, we look at Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM).

Read more »

The Motley Fool
Dividend Stocks

New Investors: 2 Canadian Dividend Stocks to Start Your RRSP Portfolio

| Andrew Walker

Here's why Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and Fortis Inc. (TSX:FTS)(NYSE:FTS) might be worth a look today.

Read more »

Dividend Stocks

Evaluating Canada’s Banks: National Bank of Canada

| Ryan Goldsman

In an attempt to evaluate Canada's banks, we'll look at National Bank of Canada (TSX:NA) today.

Read more »

The Motley Fool
Dividend Stocks

Income Investors: These Dividend Stocks Are Poised to Hike Payouts

| Haris Anwar

Enbridge Inc. (TSX:ENB)(NYSE:ENB), Fortis Inc. (TSX:FTS)(NYSE:FTS), Royal Bank of Canada (TSX:RY)(NYSE:RY), and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) are dividend stocks…

Read more »

The Motley Fool
Dividend Stocks

Have You Considered Buying Royal Bank of Canada?

| Jacob Donnelly

Royal Bank of Canada (TSX:RY)(NYSE:RY) has had a strong year and continues to boost dividends for investors.

Read more »

Bank Stocks

Home Capital Group Inc. Is Back on the Decline

| David Jagielski

Home Capital Group Inc. (TSX:HCG) has given back all of its gains since Warren Buffett's investment almost a month ago.

Read more »

The Motley Fool
Dividend Stocks

Home Capital Group Inc.: Is Rally Driven by Warren Buffett Over?

| Haris Anwar

Has the time arrived to include Home Capital Group Inc. (TSX:HCG) in your long-term portfolio?

Read more »

Dividend Stocks

2 Canadian Dividend Stocks on Sale Today

| Andrew Walker

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and Inter Pipeline Ltd. (TSX:IPL) offer above-average yield at their current stock prices.

Read more »

Dividend Stocks

Canadian Imperial Bank of Commerce Expands Further into the U.S.

| Demetris Afxentiou

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) has made another acquisition in the U.S. market. Could additional acquisitions follow?

Read more »

Dividend Stocks

How Investors Can Benefit From Rising Rates

| Ryan Goldsman

Following an increase in interest rates, shares of Canadian Western Bank (TSX:CWB) are in primed position for a long road…

Read more »

Dividend Stocks

With Higher Rates, Which Bank Is Best for Your Portfolio?

| Jason Phillips

With the central bank of Canada raising interest rates, the Canadian banks should soon see added profits flowing directly to…

Read more »

The Motley Fool
Dividend Stocks

How Will a Stronger Loonie Affect Your Investments? It Might Not Be What You Think

| Jason Phillips

A stronger Canadian dollar has serious implications for investors' portfolios. Find out how companies like Cameco Corp. (TSX:CCO)(NYSE:CCJ) stand to…

Read more »

The Motley Fool
Dividend Stocks

Should You Put Your Money in Royal Bank of Canada or in Toronto-Dominion Bank?

| Stephanie Bedard-Chateauneuf, MBA

A comparison between Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Royal Bank of Canada (TSX:RY)(NYSE:RY), Canada's two biggest banks. Who will win the…

Read more »

The Motley Fool
Dividend Stocks

RRSP Investors: 2 Dividend-Growth Stocks to Hold for 25 Years

| Andrew Walker

Fortis Inc. (TSX:FTS)(NYSE:FTS) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are two of Canada's top dividend stocks. Is one a better bet right…

Read more »

Dividend Stocks

TFSA Income Investors: 2 High-Yield Dividend Stocks With Rising Payouts

| Andrew Walker

Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) now provide above-average yields. Is one more attractive?

Read more »

The Motley Fool
Bank Stocks

Bank of Nova Scotia Has the Best Long-Term Growth Potential of the Big 6

| Matt Smith

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is well positioned to continue unlocking value for investors.

Read more »

Dividend Stocks

Are Canadian Imperial Bank of Commerce’s Baby Steps in the U.S. Enough?

| Chris MacDonald

Why recent U.S. acquisitions by Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) don't really change much in the grand scheme of…

Read more »

Bank Stocks

How Many Rate Hikes Are Likely Coming From the Bank of Canada?

| Chris MacDonald

Here's my take on the future rate-hiking cycle of the Bank of Canada and how this will affect companies like…

Read more »

retired life
Dividend Stocks

Retirees: 2 Canadian Dividend-Growth Stocks to Own for a Decade

| Andrew Walker

Here's why TransCanada Corporation (TSX:TRP)(NYSE:TRP) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) should be on your radar.

Read more »

Bank Stocks

Here’s Why Canadian Imperial Bank of Commerce Was So Quick With its Latest U.S. Deal

| Joey Frenette

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is firing on all cylinders when it comes to U.S. growth. Is it time…

Read more »

The Motley Fool
Bank Stocks

Strong Economic News Should Spark Interest for Royal Bank of Canada and Toronto-Dominion Bank Stock

| Ambrose O'Callaghan

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are among those set to capitalize from a renewed outlook.

Read more »

The Motley Fool
Dividend Stocks

Dividend Investors: Should BCE Inc. or Bank of Montreal Be in Your RRSP?

| Andrew Walker

BCE Inc. (TSX:BCE)(NYSE:BCE) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are two of Canada's top dividend stocks. Is one a better RRSP…

Read more »

Bank Stocks

Canadian Imperial Bank of Commerce’s U.S. Expansion Continues

| Will Ashworth

Call it a tuck-in deal, but the latest acquisition by Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) should give its U.S.…

Read more »

Bank Stocks

Does Canadian Imperial Bank of Commerce Belong in Your Portfolio?

| Jacob Donnelly

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is expanding into the United States and paying a strong dividend, making this a…

Read more »

Dividend Stocks

The Canadian Banks Are at All-Time Highs: Is it Time to Take a Chance on This Alternative Lender?

| Jason Phillips

Each of the Big Five Canadian Banks have reached an all-time high during 2017. Meanwhile, Canadian Western Bank (TSX:CWB) currently…

Read more »

The Motley Fool
Bank Stocks

Looking for a Safe Way to Invest in Emerging Markets? Buy This Bank

| Joey Frenette

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is a Big Five bank with an international twist. Here's why investors seeking foreign exposure…

Read more »

Dividend Stocks

July Marks 3 Straight Months of Losses for the TSX: Here Are 3 Low-Volatility Stocks to Help Balance Your Portfolio

| Jason Phillips

All of the major market averages are showing weakness and are down to start July. Stocks such as Toronto-Dominion Bank…

Read more »

Dividend Stocks

How This Financial Stock Has Been Resilient in the Oil Patch

| Ryan Goldsman

There's been prolonged bad news for western Canada, but Canadian Western Bank (TSX:CWB) may be ready to turn the corner.

Read more »

time is money compounding
Bank Stocks

2 Top Canadian Stocks to Buy Before Poloz Raises Interest Rates

| Haris Anwar

Royal Bank of Canada (TSX:RY)(NYSE:RY) or Bank of Montreal (TSX:BMO)(NYSE:BMO): which one should you buy if interest rates rise?

Read more »

The Motley Fool
Bank Stocks

Toronto-Dominion Bank vs. Manulife Financial Corp.: Which Is the Better Long-Term Buy?

| Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) are two top financial stocks. Which is the better buy today?

Read more »

Dividend Stocks

2 Undervalued Bank Stocks With Excellent Dividends

| Joseph Solitro

Looking for a high-quality bank stock? If so, Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and Equitable Group Inc. (TSX:EQB) are…

Read more »

Dividend Stocks

Build a Diversified Portfolio With These 3 Dividend Stocks

| Kay Ng

Get reasonable returns from Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and two other large caps.

Read more »

Dividend Stocks

This Top 20 Canadian Large-Cap Value Stock May Surprise You

| Chris MacDonald

Of Canada's 20-largest companies, Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) remains one of my top picks for long-term investors.

Read more »

Bank Stocks

How Will a Rate Hike by Bank of Canada Affect Home Capital Group Inc.?

| Ambrose O'Callaghan

Home Capital Group Inc. (TSX:HCG) and Genworth MI Canada Inc. (TSX:MIC) are set to be tested as tightening looms.

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.