Why invest in bank stocks?

<h2>Why invest in bank stocks?</h2> <p><span style="font-weight: 400">Quality bank stocks have a strong history of generating profits and managing crises, making them a great investment.</span></p> <p>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.</p> <p>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.</p>

Bank Stocks News

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.

Related: A list of stocks in Canada’s financial sector, which includes bank stocks

[KevelPitch adtype=151]

Check back here for the most up to date information about bank stocks in Canada.

Recent Bank Stocks News

Dividend Stocks

Apple Inc. Is Taking Advantage of Canada’s Low Rates: Should You, Too?

August 16, 2017 | Haris Anwar

Apple Inc.'s (NASDAQ:AAPL) bond deal in Canada reminds investors about opportunities available in a low-rate environment. Canadian Imperial Bank of…

Dividend Stocks

2 Top Dividend Stocks on Sale

August 15, 2017 | Haris Anwar

Top dividend stocks such as Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) are on sale amid weakness in bank stocks.

Dividend Stocks

Dividend-Paying Stocks: Should You Hold Them in Your TFSA or RSP?

August 14, 2017 | Susan Portelance

Should you hold dividend-paying stocks such as Toronto Dominion Bank (TSX:TD)(NYSE:TD) in your TFSA or RSP?

Dividend Stocks

Canadian Imperial Bank of Commerce: Smart Investors Getting Bullish. Should You?

August 11, 2017 | Haris Anwar

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is one of the best candidates to benefit from higher interest rates.

Home Capital Group Inc.: New Management Team, New Results?

August 11, 2017 | Chris MacDonald

Will recent moves made by Home Capital Group Inc.'s (TSX:HCG) management team be enough to satisfy investor concerns?

RRSP Investors: 2 Canadian Dividend Stocks to Own for 20 Years

August 10, 2017 | Andrew Walker

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Canadian National Railway Company (TSX:CNR)(NYSE:CNI) have delivered big gains to buy-and-hold investors.

Dividend Stocks

TFSA Investors: 2 Dividend-Growth Stocks Set to Soar as Interest Rates Climb

August 10, 2017 | Joey Frenette

Solid dividend-growth kings, such as Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), will be beneficiaries of rising interest rates. Here's why…

Dividend Stocks

The Last Time Interest Rates Increased, This ETF Rose 50% in a Year

August 9, 2017 | David Jagielski

The last time there was a rate hike, bank stocks such as Toronto-Dominion Bank (TSX:TD)(NYSE:TD) didn't do all that well, but…

Bank Stocks

Latest Rate Hike Boosts the Attractiveness of Bank of Nova Scotia

August 9, 2017 | Matt Smith

The latest rate hike makes now the time to buy Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

Dividend Stocks

TFSA Investors: 5 Canadian Dividend Stocks to Own as Interest Rates Increase

August 9, 2017 | Andrew Walker

Here's why Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF) and four other top Canadian stocks should be on your radar today.

Bank Stocks

Is Now the Time to Buy Home Capital Group Inc.?

August 9, 2017 | Matt Smith

Despite its brush with the corporate undertaker, Home Capital Group Inc. (TSX:HCG) is becoming an increasingly attractive investment.

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

Dividend Stocks

Combat Rising Interest Rates With These 2 Great Investments

August 9, 2017 | Demetris Afxentiou

Toronto Dominion Bank (TSX:TD)(NYSE:TD) and Manulife Financial Corp. (TSX:MFC)(NYSE: MFC) pose a unique opportunity for investors looking to capitalize on…

Bank Stocks

3 Factors That Could Sink Home Capital Group Inc.’s Stock Again

August 8, 2017 | Haris Anwar

Home Capital Group Inc. (TSX:HCG) shares may sink again if this mortgage rule is implemented.

Bank Stocks

2 Reasons Royal Bank of Canada Deserves Your Attention

August 8, 2017 | Ambrose O'Callaghan

Royal Bank of Canada (TSX:RY)(NYSE:RY) settles U.S. litigation and makes a big announcement regarding a leap in technology.

Bank Stocks

Toronto-Dominion Bank: The Best Bargain of the Big 5?

August 8, 2017 | Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is one of the highest-quality dividend-growth stocks on the TSX, and here's why it's the best bargain…

Dividend Stocks

Housing Bubble: Should Investors Be Worried About Canadian Banks?

August 7, 2017 | Haris Anwar

Here is why Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is more exposed to Canadian housing bubble.

Dividend Stocks

3 Top Dividend Stocks on Sale

August 7, 2017 | Jason Phillips

These three stocks, including Home Capital Group (TSX:HCG) offer an attractive mix of dividend income with the potential for sizeable…

Dividend Stocks

Retired? 3 Stocks You Might Want to Buy

August 4, 2017 | Jason Phillips

These three stocks, including Enbridge Inc. (TSX:ENB)(NYSE:ENB), pay reasonable dividend yields and operate in stable industries, meaning the risk of…

This Big 5 Bank Has a History of Value and Dividend Increases

August 4, 2017 | Brad Macintosh

When you look at its dividend rate (4.75%), dividend history (>20 years), and dividend-payout ratio (

Bank Stocks

Better Buy: Toronto-Dominion Bank vs. Bank of Nova Scotia

August 4, 2017 | Ambrose O'Callaghan

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) hope to beat expectations again ahead of third-quarter earnings.

Bank Stocks

Smart Investors Should Probably Avoid This Canadian Bank

August 3, 2017 | Joey Frenette

Canadian Western Bank (TSX:CWB) may seem cheap, but here's why investors won't get the superior returns of the Big Six…

Bank Stocks

Home Capital Group Inc.: Boom or Bust?

August 3, 2017 | Chris MacDonald

How will Canadian alternative lenders such as Home Capital Group Inc. (TSX:HCG) fare after the new regulations put in place by…

Energy Stocks

New RRSP Investors: Should You Own Bank of Nova Scotia or Enbridge Inc.?

August 3, 2017 | Andrew Walker

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) are two of Canada's top companies. Is one more attractive right…

2 Dividend-Growth Stocks to Bet on Rising Interest Rates

August 3, 2017 | Haris Anwar

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and CI Financial Corp. (TSX:CIX) are two dividend-growth stocks to bet on Canada's rising interest rates.

Dividend Stocks

Evaluating Canada’s Regional Banks: Canadian Western Bank

August 2, 2017 | Ryan Goldsman

After evaluating the major banks, we now turn to regional bank Canadian Western Bank (TSX:CWB).

4 High-Paying Dividend Stocks That You Should Buy

August 2, 2017 | Demetris Afxentiou

Enbridge Inc. (TSX:ENB)(NYSE:ENB) and three other stocks are great dividend-paying investments that should be part of any portfolio.

Bank Stocks

Are the Short-Sellers Right About Toronto-Dominion Bank?

August 2, 2017 | Matt Smith

Despite the heavy short-selling, Toronto-Dominion Bank (TSX:TD)(NYSE:TD) continues to perform strongly.

Dividend Stocks

Evaluating Canada’s Regional Banks: Laurentian Bank of Canada

August 1, 2017 | Ryan Goldsman

After evaluating the major banks last week, we now turn to regional bank Laurentian Bank of Canada (TSX:LB).

Bank Stocks

Are These 3 Bank Stocks a Bargain?

August 1, 2017 | Ambrose O'Callaghan

Downward pressure from economic headwinds could mean Bank of Montreal (TSX:BMO)(NYSE:BMO) and others offer great value.

Bank Stocks

Should You Buy Toronto-Dominion Bank or Canadian Imperial Bank of Commerce Today?

August 1, 2017 | Andrew Walker

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) are two of Canada's top companies. Is one more attractive…

Dividend Stocks

Evaluating Canada’s Banks: The Conclusion

July 31, 2017 | Ryan Goldsman

After looking at Canada's six major banks, Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) holds a clear position.

Dividend Stocks

3 Things Every Young Investor Must Do

July 31, 2017 | Colin Beck

Young investors should follow these three tips and invest in great companies such as Toronto Dominion Bank (TSX:TD)(NYSE:TD).

Dividend Stocks

Has the Housing Market Created an Opportunity to Buy This Stock?

July 31, 2017 | Colin Beck

With fear surrounding the housing market in Canada, is it time for investors to get greedy and buy shares in…

Dividend Stocks

Evaluating Canada’s Banks: Royal Bank of Canada

July 29, 2017 | Ryan Goldsman

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

Dividend Stocks

Evaluating Canada’s Banks: Toronto-Dominion Bank

July 28, 2017 | Ryan Goldsman

In an attempt to evaluate Canada's banks, we look at Toronto-Dominion Bank (TSX:TD)(NYSE:TD).

Dividend Stocks

RRSP Investors: 2 Oversold Canadian Stocks to Consider for the Next 20 Years

July 27, 2017 | Andrew Walker

Here's why Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) deserve a closer look today.

Dividend Stocks

A Top Canadian Dividend Stock to Consider for Your TFSA Retirement Fund

July 27, 2017 | Andrew Walker

Here's how top dividend stocks such as Royal Bank of Canada (TSX:RY)(NYSE:RY) can help you hit your retirement goals.

Dividend Stocks

Evaluating Canada’s Banks: Bank of Nova Scotia

July 27, 2017 | Ryan Goldsman

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

Bank Stocks

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

July 26, 2017 | 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…

Dividend Stocks

Evaluating Canada’s Banks: Bank of Montreal

July 26, 2017 | Ryan Goldsman

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

❮1…191 192193194 195…❯

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.