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.

Recent Bank Stocks News

The Motley Fool
Dividend Stocks

RRSP Investors: 2 Dividend-Growth Stocks to Hold for 20 Years

| Andrew Walker

Here's why Canadian National Railway Company (TSX:CNR)(NYSE:CNI) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) might be worth a look.

Read more »

The Motley Fool
Dividend Stocks

Royal Bank of Canada’s Top Portfolio Picks for 2017

| Alexander John Tun

Here's a look inside Royal Bank of Canada's (TSX:RY)(NYSE:RY) top Canadian picks for 2017.

Read more »

The Motley Fool
Bank Stocks

Why Toronto-Dominion Bank Isn’t Expensive

| Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is considered an expensive stock by many investors, but it's actually undervalued right now given the tailwinds.

Read more »

Dividend Stocks

Better Buy: Royal Bank of Canada or Toronto-Dominion Bank?

| Alexander John Tun

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) go head to head.

Read more »

The Motley Fool
Dividend Stocks

How to Determine if a Stock Is Cheap or Expensive

| Kay Ng

Increase your returns by determining if a stock is a good value or not. Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is used as…

Read more »

The Motley Fool
Bank Stocks

Bank of Nova Scotia Has Growth Potential Moving Forward

| Karl Utermohlen

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) has raised its position on numerous companies that are poised for success. Here's what you…

Read more »

Bank Stocks

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

| Andrew Walker

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Fortis Inc. (TSX:FTS)(NYSE:FTS) are two of Canada's top companies. Is one more attractive today…

Read more »

The Motley Fool
Dividend Stocks

Why Investing in Bank of Nova Scotia Is Right for Your Portfolio

| Demetris Afxentiou

Strong growth, dividends, and growth prospects continue to make Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) a strong candidate for nearly any…

Read more »

Dividend Stocks

RRSP Investors: 2 Dividend-Growth Picks for 2017

| Andrew Walker

Here's why Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) should be on your radar.

Read more »

Bank Stocks

1 Stock to Buy for Your TFSA With Next Year’s Contribution

| Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) had an impressive year, but more fantastic returns could be in store for 2017 as the stock…

Read more »

The Motley Fool
Dividend Stocks

What to Ask to See if a Stock Is for You

| Kay Ng

Not all stocks are suitable for all investors. Ask yourself this simple but powerful question to see if Royal Bank…

Read more »

The Motley Fool
Bank Stocks

Toronto-Dominion Bank’s Profitability Is Under Fire: Is Now the Time to Sell?

| Chris MacDonald

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has increased its advertised mortgage rate for the second time in two months. Here's why TD is…

Read more »

Bank Stocks

This Canadian Bank Is Your Best Bet for 2017

| Joey Frenette

National Bank of Canada (TSX:NA) has quietly outperformed in 2016. The outperformance is expected to continue for 2017 and beyond…

Read more »

Dividend Stocks

Boost Your Returns by Applying This 1 Tip

| Kay Ng

Buy great companies when the market abandons them. Royal Bank of Canada (TSX:RY)(NYSE:RY) will be used to illustrate the point.

Read more »

Dividend Stocks

Have You Considered Manulife Financial Corp. Lately?

| Demetris Afxentiou

Manulife Financial Corp. (TSX:MFC)(NYSE:MFC) offers investors strong growth prospects across a number of different markets as well as a healthy…

Read more »

The Motley Fool
Bank Stocks

Canadian Banks Commit the Cardinal Sin

| Will Ashworth

Bank of Montreal (TSX:BMO)(NYSE:BMO) was just the latest financial institution to be slapped on the wrist by the Ontario Securities…

Read more »

Bank Stocks

It Is Not the Right Time to Buy National Bank of Canada

| Karl Utermohlen

National Bank of Canada (TSX:NA) has some projects going for it, but the uncertainty in the nation's mortgages and economy…

Read more »

The Motley Fool
Bank Stocks

These 3 Factors Will Limit Upside in Canadian Banks for 2017

| Adam Mancini

2016 was another excellent year for Canadian bank stocks, but stretched valuations and slowing growth in Canadian retail segments are…

Read more »

The Motley Fool
Energy Stocks

Credit Suisse’s Top Picks for 2017

| Alexander John Tun

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Teck Resources Ltd. (TSX:TECK.B)(NYSE:TECK) are just some of the investment firm's top picks for…

Read more »

The Motley Fool
Bank Stocks

Toronto-Dominion Bank Is Headed in the Right Direction

| Karl Utermohlen

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) looks like a good stock to hold heading into 2017. The company's recent earnings and future plans…

Read more »

The Motley Fool
Dividend Stocks

Why Canadian Western Bank Could Be the Big Winner in 2017

| Ryan Goldsman

Often ignored, Canadian Western Bank (TSX:CWB) may be the hidden gem of 2017.

Read more »

The Motley Fool
Bank Stocks

Bank of Montreal Among the Hottest Bank Stocks Right Now

| Karl Utermohlen

Bank of Montreal (TSX:BMO)(NYSE:BMO) has a strong dividend yield to go along with its positive earnings, helping to boost investor…

Read more »

The Motley Fool
Bank Stocks

This Is the Best Bank to Buy for 2017

| Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is best positioned to skyrocket in 2017 thanks to increasing interest rates and potential U.S. corporate tax…

Read more »

The Motley Fool
Bank Stocks

Why a Correction Could Be in the Books for Canadian Imperial Bank of Commerce

| Joey Frenette

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) enjoyed a nice rally this year, but long-term headwinds could mean a correction is…

Read more »

Dividend Stocks

A Stronger U.S. Economy Makes Toronto-Dominion Bank a Buy

| Matt Smith

Growing optimism over the outlook for the U.S. economy makes Toronto-Dominion Bank (TSX:TD)(NYSE:TD) an attractive investment.

Read more »

The Motley Fool
Bank Stocks

You’re Not Going to Believe Which Canadian Bank Had the Best Year

| Will Ashworth

If you guessed Toronto-Dominion Bank (TSX:TD)(NYSE:TD) because it grew earnings by 25% in the fourth quarter, you would be wrong.

Read more »

The Motley Fool
Bank Stocks

Bank of Nova Scotia: What to Expect in 2017

| Andrew Walker

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) has staged an impressive turnaround in 2017. Are the good times set to continue?

Read more »

Dividend Stocks

Will 2017 Finally Be the Year Toronto’s Real Estate Bubble Bursts?

| Nelson Smith

What will 2017 bring for Toronto's housing market? Will it impact Home Capital Group Inc. (TSX:HCG) and Genworth MI Canada…

Read more »

The Motley Fool
Bank Stocks

Royal Bank of Canada: A Stock to Buy Today and Forget About for Decades?

| Andrew Walker

Royal Bank of Canada (TSX:RY)(NYSE:RY) is a profit machine.

Read more »

The Motley Fool
Dividend Stocks

Why Bank of Montreal Is a Top Pick for Your Portfolio

| Demetris Afxentiou

Bank of Montreal (TSX:BMO)(NYSE:BMO) continues to provide investors with strong growth, a growing dividend, and better-than-expected results.

Read more »

Bank Stocks

Is Toronto-Dominion Bank a Buy at All-Time Highs?

| Adam Mancini

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) just delighted investors by closing above $65 per share yesterday, hitting an all-time high. For investors on…

Read more »

Dividend Stocks

Attention Canadian Savers: 2 Top RRSP Picks for 2017

| Andrew Walker

Here's why Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) should be on your RRSP radar.

Read more »

The Motley Fool
Dividend Stocks

2 Canadian Banks Just Did This: Should You Buy Now?

| Joseph Solitro

Bank of Montreal (TSX:BMO)(NYSE:BMO) and Laurentian Bank of Canada (TSX:LB) just hiked their dividends. Should you invest in one of…

Read more »

The Motley Fool
Bank Stocks

Why Toronto-Dominion Bank Will Soar in 2017

| Joey Frenette

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) reported lacklustre Q4 2016 earnings, but the U.S. segment could make the company soar in 2017.

Read more »

The Motley Fool
Bank Stocks

Why Canadian Imperial Bank of Commerce Is a Risky Play

| Joey Frenette

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) just reported a fantastic quarter, but is the stock cheap given the risks involved?

Read more »

Bank Stocks

Why Everything Is About to Change for Toronto-Dominion Bank

| Adam Mancini

For Toronto-Dominion Bank (TSX:TD)(NYSE:TD), rising interest rates in 2017 could potentially mean billions of extra profit in the next several…

Read more »

The Motley Fool
Bank Stocks

Canadian Imperial Bank of Commerce: It’s Still a Screaming Buy

| Will Ashworth

It might be the smallest of the five major Canadian banks, but Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is the…

Read more »

Dividend Stocks

2 of Canada’s 6 Largest Banks Just Did This

| Joseph Solitro

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and National Bank of Canada (TSX:NA) just raised their dividends. Which should you invest…

Read more »

The Motley Fool
Dividend Stocks

Dividend Investors: DH Corp. Slashes Dividend

| Chris MacDonald

DH Corp. (TSX:DH) recently announced a dividend cut of 62.5% to pay down debt, repurchase shares, and engage in growth…

Read more »

The Motley Fool
Bank Stocks

Is Royal Bank of Canada Still a Good Buy After its Abysmal Earnings Report?

| Joey Frenette

Royal Bank of Canada (TSX:RY)(NYSE:RY) had an ugly earnings report; it missed earnings and had an ROE downgrade. Is it…

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.