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

4 Starter Stocks for Every Beginner Investor

April 14, 2017 | Colin Beck

Toronto-Dominion Bank (TSX:TD)(NYSE:TD), Fortis Inc. (TSX:FTS)(NYSE:FTS), TransCanada Corporation (TSX:TRP)(NYSE:TRP), and CCL Industries Inc. (TSX:CCL.B) are four fantastic stocks that are…

Bank Stocks

Are Financial Stocks Due for a Correction?

April 14, 2017 | Chris MacDonald

The wide-spread Trump Rally for financial stocks around the world, including Royal Bank of Canada (TSX:RY)(NYSE:RY), may be heading the…

Bank Stocks

Toronto-Dominion Bank Is NOT Severely Undervalued

April 13, 2017 | Will Ashworth

As long as Toronto-Dominion Bank (TSX:TD)(NYSE:TD) continues to maintain questionable business practices, I find it hard to buy the argument…

Bank Stocks

Toronto-Dominion Bank Is Severely Undervalued

April 10, 2017 | Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is looking ridiculously cheap. Should you buy now?

Dividend Stocks

The $5 Million Tax-Free Savings Account

April 10, 2017 | Ryan Goldsman

With the potential to reach the $5 million mark, every young investor needs to know about Royal Bank of Canada…

Bank Stocks

National Bank of Canada Is Underrated, But Is it Undervalued?

April 7, 2017 | Joey Frenette

National Bank of Canada (TSX:NA) has flown under the radar of many investors. Is it a buy today?

Bank Stocks

Why All the Insider Selling at Home Capital Group Inc.?

April 7, 2017 | Chris MacDonald

At Home Capital Group Inc. (TSX:HCG), an interesting series of events has taken place over the past year that investors…

Bank Stocks

Home Capital Group Inc.: Why it’s Important to Listen to the Short-Sellers

April 6, 2017 | Chris MacDonald

Home Capital Group Inc. (TSX:HCG) has been hit hard by short-sellers, and it may be time to take some of…

Dividend Stocks

Are There Opportunities in the Canadian Banking Industry Outside the Big 6?

April 6, 2017 | Colin Beck

Canadian Western Bank (TSX:CWB) and Laurentian Bank of Canada (TSX:LB) are not among the Big Six banks. Are they hidden…

Dividend Stocks

Canadian Western Bank May Be a Great Buy!

April 5, 2017 | Ryan Goldsman

Canadian Western Bank (TSX:CWB) may be the bank stock with the highest potential for growth after last week's announcement.

2 Common Mistakes Young Investors Should Avoid

April 5, 2017 | Colin Beck

Learn from these common mistakes; buy and hold great companies such as Royal Bank (TSX:RY)(NYSE:RY) forever.

Bank Stocks

Canadian Imperial Bank of Commerce Gives Peers a Beat-Down

April 4, 2017 | Will Ashworth

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) gives investors another reason to like it better than its peers.

Bank Stocks

PrivateBancorp Inc. Will Make Canadian Imperial Bank of Commerce Great Again

April 3, 2017 | Joey Frenette

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is determined to get the international diversification it needs. Should you buy it on…

Dividend Stocks

Boring Is Better: 2 Unexciting Stocks That Will Provide Fantastic Returns

April 3, 2017 | Colin Beck

Power Financial Corp. (TSX:PWF), and Royal Bank of Canada (TSX:RY)(NYSE:RY) are two companies investors can buy and hold forever.

Bank Stocks

Why Toronto-Dominion Bank Will Bounce Back

March 31, 2017 | Chris MacDonald

Toronto-Dominion Bank's (TSX:TD)(NYSE:TD) stock price has taken a hit of late over accusations of malpractice at its retail banking branches.…

Dividend Stocks

2 Reasons to Buy Royal Bank of Canada

March 31, 2017 | Jacob Donnelly

Royal Bank of Canada (TSX:RY)(NYSE:RY) is an appealing company because of its consistently growing earnings and the lucrative dividend.

Dividend Stocks

4 Income and Growth Stocks to Start Any Portfolio

March 31, 2017 | Demetris Afxentiou

BCE Inc. (TSX:BCE)(NYSE:BCE) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are just a few of the great companies that can build any…

Energy Stocks

TFSA Investors: Should You Buy Royal Bank of Canada or Enbridge Inc. Today?

March 29, 2017 | Andrew Walker

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) are two of Canada's top companies. Is one a better bet…

Dividend Stocks

Bank of Montreal: The Ultimate Bank Stock

March 29, 2017 | Jacob Donnelly

Bank of Montreal (TSX:BMO)(NYSE:BMO) has never missed a dividend payment and continues to grow, making it an ultimate dividend stock.

Dividend Stocks

Canadian Bank Stocks Will Outperform Until This Huge Advantage Goes Away

March 28, 2017 | Nelson Smith

Banks such as Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and Royal Bank of Canada (TSX:RY)(NYSE:RY) have a huge advantage which has…

Dividend Stocks

What Should You Do if You’re Worried About a Market Crash?

March 27, 2017 | Kay Ng

Inevitably, a market crash will occur. You can prepare for it now by having a quality, diversified portfolio with Royal…

Dividend Stocks

Is it Time to Buy Shares in These 2 Banks?

March 23, 2017 | Colin Beck

With the negative press Canadian banks have been receiving lately, should investors be buying shares in Bank of Nova Scotia…

Bank Stocks

Why Toronto-Dominion Bank Is an Absolute Steal

March 23, 2017 | Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is oversold and a strong buy at current levels.

Dividend Stocks

Is Bank of Nova Scotia a Good Investment?

March 22, 2017 | Demetris Afxentiou

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) has an impressive international segment, strong results, and a growing dividend. The bank is a…

Energy Stocks

Toronto-Dominion Bank vs. Enbridge Inc.: Which Is More Attractive Today?

March 22, 2017 | Andrew Walker

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) are two of Canada's top companies. Is one more attractive right now?

Bank Stocks

Shorting Canada’s Banks: A Widow-Maker Trade Almost Guaranteed to Lose

March 21, 2017 | Matt Smith

Why shorting Toronto-Dominion Bank (TSX:TD)(NYSE:TD), Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), and Royal Bank of Canada (TSX:RY)(NYSE:RY) is a losing proposition.

Dividend Stocks

What Happened to Canada’s Bank Stocks Last Week?

March 20, 2017 | Ryan Goldsman

With surprising news surfacing about Toronto-Dominion Bank (TSX:TD)(NYSE:TD), here's how shares have reacted in the week that followed.

Dividend Stocks

How to Use the Power of Compounding to Beat Stock Markets

March 20, 2017 | Neha Chamaria

Here's all you need to know about how compounding can turn your stocks, such as Canadian National Railway Company (TSX:CNR)(NYSE:CNI),…

Dividend Stocks

3 Great Dividend Stocks to Hold for the Next Decade (or More!)

March 17, 2017 | Nelson Smith

Simplify your portfolio with Bank of Nova Scotia (TSX:BNS)(NYSE:BNS), Brookfield Renewable Partners LP (TSX:BEP.UN)(NYSE:BEP), and one other company.

Energy Stocks

TransCanada Corporation vs. Royal Bank of Canada: Which Is a Better TFSA Pick?

March 17, 2017 | Andrew Walker

TransCanada Corporation (TSX:TRP)(NYSE:TRP) and Royal Bank of Canada (TSX:RY)(NYSE:RY) are two of Canada's top companies. Is one more attractive right…

Bank Stocks

Ignore the Crisis at Toronto-Dominion Bank: Buy the Dip

March 16, 2017 | Matt Smith

Regardless of the recent scandal, there are signs that Toronto-Dominion Bank (TSX:TD)(NYSE:TD) will continue to perform well over the long…

Dividend Stocks

2 Simple Questions to Identify Outperforming Stocks

March 15, 2017 | Kay Ng

Tired of underperforming the markets? Here’s how you could have outperformed by investing in Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) in…

Dividend Stocks

Is This Famous Investor Right About Toronto Real Estate?

March 15, 2017 | Nelson Smith

Legendary investor Stephen Jarislowsky weighed in on the Toronto housing market, and he's not bullish. Home Capital Group Inc. (TSX:HCG)…

Bank Stocks

It’s Not Just Toronto-Dominion Bank, Folks!

March 15, 2017 | Will Ashworth

The latest allegations of high-pressure sales tactics against Toronto-Dominion Bank (TSX:TD)(NYSE:TD) don't come as a surprise — and you can…

Bank Stocks

Ignore Bank of Nova Scotia’s Earnings Miss and Add it to Your Portfolio

March 14, 2017 | Matt Smith

The outlook for Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) continues to improve.

Dividend Stocks

Avoid Toronto-Dominion Bank — and Not Because of the Headlines

March 14, 2017 | Ryan Goldsman

Although shares pulled back by over 5% on Friday, investors may still be wise to avoid shares of Toronto-Dominion Bank…

Bank Stocks

A Lesson From Warren Buffett: How to Play Toronto-Dominion Bank After its “Wells Fargo Moment”

March 13, 2017 | Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is hurting after news that it pulled a Wells Fargo & Co. (NYSE:WFC) move. What would Warren…

Dividend Stocks

When Does Liquidity Become a Concern for Stock Market Investors?

March 10, 2017 | Brian Paradza, CFA

Frequently selling stocks for personal liquidity needs reduces portfolio efficiency. Adding great dividend-paying stocks such as Thompson Reuters Corp. (TSX:TRI)(NYSE:TRI)…

Retirees: These 3 Dividend Studs Are as Good as Any Pension

March 10, 2017 | Nelson Smith

Great dividend-growth stocks such as Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), Inter Pipeline Ltd. (TSX:IPL), and Transcontinental Inc. (TSX:TCL.A) are…

Bank Stocks

Is Canadian Imperial Bank of Commerce the Riskiest Big Five Bank?

March 9, 2017 | Joey Frenette

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) looks cheap, but are the risks too high to consider at current levels?

❮1…196 197198199 200…❯

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.