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

Bank Stocks

These Stocks Could Jump After Warren Buffett Lifeline to Home Capital Group Inc.

| Haris Anwar

Warren Buffett’s bailout of the Home Capital Group Inc. (TSX:HCG) opens buying opportunities for income investors.

Read more »

The Motley Fool
Bank Stocks

Are Canadian Banks Still a Good Buy?

| David Greenfield

These three Canadian banks—Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Royal Bank of Canada (TSX:RY)(NYSE:RY)—continue to show stability…

Read more »

Dividend Stocks

TFSA Investors: 2 Canadian Dividend Stocks to Help You Save for Retirement

| Andrew Walker

Fortis Inc. (TSX:FTS)(NYSE:FTS) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are worth a look today. Here's why.

Read more »

Bank Stocks

RRSP Investors: Should You Buy Canadian Imperial Bank of Commerce Today?

| Andrew Walker

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is attracting value investors. Is it time to own this stock?

Read more »

Bank Stocks

Is Home Capital Group Inc. Undervalued?

| Matt Smith

Home Capital Group Inc. (TSX:HCG) may have survived its brush with failure, but is it a worthwhile investment?

Read more »

Dividend Stocks

Why Canadian Imperial Bank of Commerce Is a Great Investment Opportunity

| Demetris Afxentiou

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) recently received regulatory approvals for the purchase of PrivateBancorp, which could mark the start…

Read more »

Bank Stocks

Should Investors Pick Up Shares of Bank of Montreal?

| Jacob Donnelly

Bank of Montreal (TSX:BMO)(NYSE:BMO) presents a great opportunity to get shares at a discount. It also has paid a dividend…

Read more »

Bank Stocks

The Cynic’s Solution to Owning Bank Stocks

| Will Ashworth

Royal Bank of Canada (TSX:RY)(TSX:RY) is the latest big bank to get its hand caught in the cookie jar. For…

Read more »

Dividend Stocks

Why Now May Be the Time to Buy Canadian Imperial Bank of Commerce

| Chris MacDonald

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) appears to be ready to take advantage of rising interest rates, making this an…

Read more »

The Motley Fool
Dividend Stocks

Manulife Financial Corp.: A Growth Play Unlike Any Other

| Demetris Afxentiou

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) continues to impress with growing sales in Asia and the U.S., fueling growth for years to…

Read more »

The Motley Fool
Bank Stocks

Bank of Nova Scotia: Your Doorway to International Banking

| Jacob Donnelly

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) has incredible exposure in Latin America, providing an opportunity for income to grow fast.

Read more »

Bank Stocks

Canadian Imperial Bank of Commerce Should Buy This California Bank Next

| Will Ashworth

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) should look to California for its next acquisition. Here’s why.

Read more »

Dividend Stocks

Is it Time to Buy Canadian Imperial Bank of Commerce Shares?

| Kay Ng

Are Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) shares cheap enough for your hard-earned dollars?

Read more »

time is money compounding
Dividend Stocks

Canadian Savers: 2 Top Canadian Dividend Stocks for Your RRSP Portfolio

| Andrew Walker

Here's why Royal Bank of Canada (TSX:RY)(NYSE:RY) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) deserve a closer look.

Read more »

The Motley Fool
Bank Stocks

Toronto-Dominion Bank: What Is Going on?

| Jacob Donnelly

Although Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has been dealing with some public relations problems, there is an opportunity to get shares 7%…

Read more »

Bank Stocks

National Bank of Canada: The Smallest of the Big 6 Is Still a Smart Buy

| Ambrose O'Callaghan

National Bank of Canada (TSX:NA) surpasses projections in the latest report.

Read more »

Bank Stocks

More U.S. Expansion Acquisitions to Come for Canadian Imperial Bank of Commerce?

| Joey Frenette

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) may continue to beef up its U.S. presence to become like peers Bank of…

Read more »

The Motley Fool
Dividend Stocks

Income Investors: 4 Low-Volatility Stocks Yielding Over 4%

| Jason Phillips

One of the challenges of income investing is balancing the need for current yield without putting your capital at risk.…

Read more »

Bank Stocks

Does Canadian Imperial Bank of Commerce Deserve to Be This Cheap?

| Joey Frenette

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is just too cheap to ignore. Here's why shares are so cheap and why…

Read more »

The Motley Fool
Dividend Stocks

Top Dividend Stock: Canadian Imperial Bank of Commerce or Enbridge Inc.?

| Andrew Walker

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) both offer yields approaching 5%. Is one a better bet…

Read more »

The Motley Fool
Bank Stocks

Royal Bank of Canada Share Price: 450 Employees Away From Perfection?

| Will Ashworth

Royal Bank of Canada (TSX:RY)(NYSE:RY) announced June 21 that it’s cutting 450 jobs in its Toronto head offices. What does…

Read more »

The Motley Fool
Dividend Stocks

RRSP Investors: 2 Canadian Dividend Stocks With International Exposure

| Andrew Walker

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and Sun Life Financial Inc. (TSX:SLF)(NYSE:SLF) are investing in international markets. Is one a better…

Read more »

The Motley Fool
Bank Stocks

Income Investors: It’s Time to Load Up on Toronto-Dominion Bank

| Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has slowed down. Here's why long-term investors should consider loading up on shares before the next breakout.

Read more »

The Motley Fool
Bank Stocks

Royal Bank of Canada: Is There Concern for This Bank Stock?

| Jacob Donnelly

Royal Bank of Canada (TSX:RY)(NYSE:RY) continues to execute with little concern about the housing market, providing an opportunity for dividends…

Read more »

Dividend Stocks

How a Rate Hike Could Help Investors

| Ryan Goldsman

With an interest rate increase on the horizon, investors in Bank of Montreal (TSX:BMO)(NYSE:BMO) may reap the rewards.

Read more »

The Motley Fool
Dividend Stocks

2 Banks With Very Different Investment Strategies

| Demetris Afxentiou

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are great investment opportunities, though they have very different investment…

Read more »

Dividend Stocks

How Cheap Should a Stock Be Before You Buy it?

| Kay Ng

Let's find out if Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is cheap enough to buy today.

Read more »

Dividend Stocks

Here’s How You Get Motley Fool Dividend Investor Canada Picks at a Discount!

| Taylor Muckerman

Since January 2017, the Motley Fool Dividend Investor Canada service has made it its mission to provide Canadian investors with…

Read more »

Dividend Stocks

Stock Newsletters: Motley Fool Stock Advisor Canada vs. Dividend Investor Canada

| Motley Fool Staff

One of the primary goals of any investor who buys stocks should be to beat the broader market's performance. But…

Read more »

Dividend Stocks

What is Motley Fool Dividend Investor Canada?

| Motley Fool Staff

Everything you want to know about Dividend Investor Canada, a stock-picking service focusing on top dividend-paying stocks from The Motley…

Read more »

Dividend Stocks

What is Motley Fool Stock Advisor Canada?

| Motley Fool Staff

Everything you want to know about Stock Advisor Canada, a stock-picking service focusing on high-potential stocks from The Motley Fool.

Read more »

Dividend Stocks

Here’s How You Get Motley Fool Stock Advisor Canada Picks at a Discount!

| Motley Fool Staff

Since 2013, the Motley Fool Stock Advisor Canada service has made it its mission to provide investors with a stream…

Read more »

The Motley Fool
Dividend Stocks

4 Stocks With Dividend Yields Over 4%

| Stephanie Bedard-Chateauneuf, MBA

Looking for high-yield stocks? Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), Telus Corporation (TSX:T)(NYSE:TU), Emera Inc. (TSX:EMA), and BCE Inc. (TSX:BCE)(NYSE:BCE)…

Read more »

The Motley Fool
Bank Stocks

Will Canada’s Red-Hot Housing Market Trigger a Financial Crisis?

| Matt Smith

Despite the fears of the vulnerability of Canada's financial system to a housing bust, it is highly unlikely that the…

Read more »

The Motley Fool
Bank Stocks

Is Toronto-Dominion Bank as Risky as the Short Sellers Believe?

| Matt Smith

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is not as risky as some investors believe.

Read more »

Dividend Stocks

Why Canada May Be Going in to a Recession

| Ryan Goldsman

Is Canadian Western Bank (TSX:CWB) telling investors that a recession is coming?

Read more »

The Motley Fool
Dividend Stocks

RRSP Investors: 2 Contrarian Dividend Picks for Your Retirement Portfolio

| Andrew Walker

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and Power Financial Corp. (TSX:PWF) are interesting high-yield picks today.

Read more »

The Motley Fool
Bank Stocks

Which of the Big 5 Canadian Banks Should You Own?

| Stephen Zeagman

Toronto Dominion Bank (TSX:TD)(NYSE:TD) and Royal Bank of Canada (TSX:RY)(NYSE:RY) are the two banks that rise to the top among…

Read more »

The Motley Fool
Bank Stocks

How Home Capital Group Inc. Differs From the Big Banks

| Chris MacDonald

The stability of funding sources for embattled alternative lender Home Capital Group Inc. (TSX:HCG) was highlighted in a Bank of…

Read more »

win
Dividend Stocks

2 Canadian Banks With High-Returns Potential

| Kay Ng

Analysts think Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and another bank can outperform their peer group in the near term.

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.