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

2 Dividend Stocks I’d Buy Today With an Extra $20,000

| Andrew Walker

Here's why Royal Bank of Canada (TSX:RY)(NYSE:RY) and Agrium Inc. (TSX:AGU)(NYSE:AGU) should be on your radar.

Read more »

Dividend Stocks

Young Investors: 2 Dividend Stocks to Buy and Hold in Your TFSA for Decades

| Andrew Walker

Here's why BCE Inc. (TSX:BCE)(NYSE:BCE) and Bank of Montreal (TSX:BMO)(NYSE:BMO) should be on your TFSA radar.

Read more »

The Motley Fool
Bank Stocks

Why I Remain Bullish on Canadian Western Bank Despite the Rout in Crude

| Matt Smith

Despite the economic slump in the energy patch, Canadian Western Bank (TSX:CWB) is an attractive investment.

Read more »

The Motley Fool
Dividend Stocks

Does Your TFSA Have These 3 Forever Stocks?

| Nelson Smith

Why Royal Bank of Canada (TSX:RY)(NYSE:RY), Extendicare Inc. (TSX:EXE), and Telus Corporation (TSX:T)(NYSE:TU) are perfect choices for a TFSA.

Read more »

Bank Stocks

Should You Be Worried About Toronto-Dominion Bank’s 80 New Competitors?

| Adam Mancini

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is up against its biggest threat yet: technology companies that create innovative products that target TD's business.…

Read more »

Dividend Stocks

Dividend Investors: Should You Buy Toronto-Dominion Bank or Fortis Inc.?

| Andrew Walker

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Fortis Inc. (TSX:FTS) are both great dividend picks. Is one a better bet right now?

Read more »

The Motley Fool
Energy Stocks

Should You Put Royal Bank of Canada or Enbridge Inc. in Your TFSA?

| Andrew Walker

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) often come up as top picks. Is one a better bet…

Read more »

The Motley Fool
Dividend Stocks

What Should You Do When Stock Prices Are at All-Time Highs?

| Kay Ng

The stock market is near an all-time high. What should you do with A-grade stocks such as The Coca-Cola Co…

Read more »

The Motley Fool
Bank Stocks

Bank of Montreal: A Solid Income Generator for Anyone

| Jacob Donnelly

Because of its low exposure to the energy sector, smart acquisitions, and 150+ year dividend-payment history, Bank of Montreal (TSX:BMO)(NYSE:BMO)…

Read more »

The Motley Fool
Dividend Stocks

Should You Buy Canadian Western Bank?

| Kay Ng

Canadian Western Bank (TSX:CWB) is doing the right thing by expanding outside Alberta, but is that enough to turn the…

Read more »

The Motley Fool
Energy Stocks

Is Toronto-Dominion Bank or TransCanada Corporation a Better Bet Right Now?

| Andrew Walker

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and TransCanada Corporation (TSX:TRP)(NYSE:TRP) are both popular stocks. Which one is right for you?

Read more »

Energy Stocks

Why the TSX Could Return 10% From Current Levels (and How to Profit)

| Adam Mancini

A combination of recovering oil prices, an improving Canadian economy, and undervaluation could lead the TSX to a double-digit 2016.…

Read more »

The Motley Fool
Dividend Stocks

2 Top Dividend Picks for Retirement Income

| Andrew Walker

Here's why Bank of Montreal (TSX:BMO)(NYSE:BMO) and BCE Inc. (TSX:BCE)(NYSE:BCE) deserve a closer look.

Read more »

Bank Stocks

3 Reasons to Consider Toronto-Dominion Bank Right Now

| Andrew Walker

Here's why Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is still attractive.

Read more »

The Motley Fool
Bank Stocks

Is Canadian Imperial Bank of Commerce About to Make a Huge Acquisition?

| Nelson Smith

Rumours are flying that Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is on the verge of acquiring a bank in the…

Read more »

The Motley Fool
Dividend Stocks

3 Things a Self-Directed Stock Investor Should Do

| Kay Ng

Are you ready to become a self-directed investor? When buying individual stocks such as Royal Bank of Canada (TSX:RY)(NYSE:RY), you…

Read more »

The Motley Fool
Dividend Stocks

2 Balanced Growth Stocks for Any Portfolio

| Demetris Afxentiou

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Brookfield Asset Management Inc. (TSX:BAM.A)(NYSE:BAM) are two very different companies that provide great dividends…

Read more »

Bank Stocks

3 Strategies for Managing the Risks Associated With Volatile Markets

| Matt Smith

Learn to manage market volatility with Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) and BCE Inc. (TSX:BCE)(NYSE:BCE).

Read more »

The Motley Fool
Dividend Stocks

Tips to Avoid Losing Money When Investing in Stocks

| Kay Ng

Want to win in the stock market? Use these tips to put the odds in your favour. Toronto-Dominion Bank (TSX:TD)(NYSE:TD)…

Read more »

Stocks for Beginners

Attention Millennials: Here’s How the TFSA Can Help You Build a Massive Nest Egg

| Andrew Walker

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Canadian National Railway Company (TSX:CNR)(NYSE:CNI) are great examples of stocks that can make investors…

Read more »

Dividend Stocks

2 RRSP Picks for Long-Term Investors

| Andrew Walker

Here's why Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Enbridge Inc. (TSX:ENB)(NYSE:ENB) look attractive right now.

Read more »

The Motley Fool
Bank Stocks

How Risky Is Bank of Nova Scotia?

| Matt Smith

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) is facing considerable short-term headwinds.

Read more »

Bank Stocks

Toronto-Dominion Bank Has Minimal Downside at $55 Per Share

| Benjamin Sinclair

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is safer than it looks. It's reasonably priced, too.

Read more »

Dividend Stocks

Dividend Investors: These 2 Stocks Belong in Your TFSA

| Andrew Walker

Here's why Royal Bank of Canada (TSX:RY)(NYSE:RY) and Canadian National Railway Company (TSX:CNR)(NYSE:CNI) look attractive.

Read more »

The Motley Fool
Dividend Stocks

2 Top Dividend Picks to Boost Your Investment Income

| Andrew Walker

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

Read more »

The Motley Fool
Dividend Stocks

This Passive-Income Champion Hasn’t Missed a Dividend in 187 Years

| Nelson Smith

Bank of Montreal (TSX:BMO)(NYSE:BMO) has the longest consecutive dividend streak of any Canadian company. But that's not the only reason…

Read more »

The Motley Fool
Bank Stocks

Why Toronto-Dominion Bank Investors Shouldn’t Expect Double-Digit Returns Going Forward

| Adam Mancini

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) has generated a total shareholder return of 11.8% annually for the past five years according to its…

Read more »

Dividend Stocks

Canadian Western Bank Is Still Deeply Discounted

| Kay Ng

Should you invest in Canadian Western Bank (TSX:CWB)? It depends on if you like value and dividends.

Read more »

Dividend Stocks

3 Reasons to Buy Toronto-Dominion Bank Today

| Joseph Solitro

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) is a strong buy today for three reasons. Should you be a buyer?

Read more »

The Motley Fool
Dividend Stocks

If Bank of Nova Scotia Is Not a Buy, Is it a Sell?

| Kay Ng

Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) recovered from recent lows. If a buy is not warranted, is it a sell?

Read more »

The Motley Fool
Dividend Stocks

2 Top Dividend–Growth Stocks for a TFSA

| Andrew Walker

Here's how investors have used Royal Bank of Canada (TSX:RY)(NYSE:RY) and Telus Corporation (TSX:T)(NYSE:TU) to build some serious savings.

Read more »

The Motley Fool
Dividend Stocks

Dividend Investors: Learning From Price Dips

| Kay Ng

Use price dips to buy quality dividend companies such as Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

Read more »

The Motley Fool
Bank Stocks

Investors May Want to Consider Buying Toronto-Dominion Bank

| Jacob Donnelly

Because of its strong earnings and growing dividend, investors should consider buying Toronto-Dominion Bank (TSX:TD)(NYSE:TD).

Read more »

Dividend Stocks

This Passive-Income Machine Hasn’t Missed a Dividend in 148 Years

| Nelson Smith

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) has been a passive-income superstar for generations. Will the next 148 years be as…

Read more »

The Motley Fool
Dividend Stocks

2 Solid Dividend Stocks for Cautious Income Investors

| Andrew Walker

Here's why Fortis Inc. (TSX:FTS) and Royal Bank of Canada (TSX:RY)(NYSE:RY) should be on your radar.

Read more »

The Motley Fool
Bank Stocks

Should You Buy Bank of Montreal or Bank of Nova Scotia Right Now?

| Andrew Walker

Here's a comparison of some key points of interest for Bank of Montreal (TSX:BMO)(NYSE:BMO) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

Read more »

The Motley Fool
Bank Stocks

How Toronto-Dominion Bank Is Set to Save $400 Million in 2016

| Adam Mancini

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stands out among its peers in terms of emphasizing cost control, and the company's recent restructuring charges…

Read more »

Dividend Stocks

Dividend Investors: 2 Stocks That Won’t Let You Down

| Andrew Walker

Here's why Telus Corporation (TSX:T)(NYSE:TU) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) should be on your radar.

Read more »

The Motley Fool
Dividend Stocks

Has the Rally Ended for Canada’s Banks?

| Kay Ng

Should you buy banks such as Bank of Montreal (TSX:BMO)(NYSE:BMO) now or wait for dips to lower prices?

Read more »

The Motley Fool
Bank Stocks

Why This Year Could Be Toronto-Dominion Bank’s Best Year Since 2013

| Adam Mancini

A combination of undervaluation and gradually improving oil prices throughout the year could return Toronto-Dominion Bank (TSX:TD)(NYSE:TD) to solid double-digit…

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.