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

Dividend Investors: Should You Buy Toronto-Dominion Bank or Bank of Nova Scotia?

July 29, 2015 | Andrew Walker

Here's what investors need to know when evaluating Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

Bank Stocks

Why Is Toronto-Dominion Bank Canada’s Most Shorted Stock?

July 28, 2015 | Adam Mancini

Investors are widely betting that Toronto-Dominion Bank (TSX:TD)(NYSE:TD) shares are headed downwards. Should you be worried?

Dividend Stocks

Attention Retirees: 2 Safe Dividend Stocks Yielding More Than 4.5%

July 28, 2015 | Andrew Walker

Here's why retirees can rely on Bank of Montreal (TSX:BMO)(NYSE:BMO) and BCE Inc. (TSX:BCE)(NYSE:BCE).

Bank Stocks

Bank of Nova Scotia Lowers Risk by Expanding Internationally

July 27, 2015 | Ryan Vanzo

When looking at Canada’s big banks, Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) has a unique international advantage.

Dividend Stocks

3 Reasons Canadian Western Bank Is a Great Long-Term Investment

July 27, 2015 | Kay Ng

Canadian Western Bank's (TSX:CWB) now gives a decent 3.7% yield at a record low valuation. It's a rare opportunity to…

Bank Stocks

Toronto-Dominion Bank and Royal Bank of Canada: Which Should You Buy?

July 27, 2015 | Adam Mancini

Both Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Royal Bank of Canada (TSX:TD)(NYSE:TD) are trading at bargain prices.

Bank Stocks

3 Reasons Bank of Montreal Is Canada’s Most Underrated Bank

July 27, 2015 | Adam Mancini

Here's why investors need to start considering Bank of Montreal (TSX:BMO)(NYSE:BMO) for above-average returns with less risk.

2 Top Dividend Stocks for Young Investors

July 24, 2015 | Andrew Walker

Here's why Royal Bank of Canada (TSX:RY) (NYSE:RY) and Fortis Inc. (TSX:FTS) are great choices for new investors.

Bank Stocks

Why Bank of Montreal Is a Buy After the Interest Rate Cut

July 24, 2015 | Adam Mancini

The Bank of Canada has cut overnight rates to a low 0.50%. While this may be bad for bank profits,…

Dividend Stocks

2 Dividend Growth Stars for All Investors

July 23, 2015 | Andrew Walker

Here's why Telus Corporation (TSX:T)(NYSE:TU) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are smart picks right now.

Dividend Stocks

How to Reduce Risks of Investing in Stocks: Part 3

July 23, 2015 | Kay Ng

You can apply one simple strategy to get positive returns even in a down market. Buy stable, quality dividend companies…

Bank Stocks

5 Unbelievable Facts About the Vancouver Real Estate Market

July 23, 2015 | Nelson Smith

The Vancouver real estate market is incredibly overvalued. Why investors want to avoid it, Canadian Western Bank (TSX:CWB), and Genworth…

4 Oversold Dividend-Growth Giants

July 22, 2015 | Andrew Walker

BCE Inc. (TSX:BCE)(NYSE:BCE) and Bank of Nova Scotia (TSX:BNS)(NYSE:BNS) are just two of the stocks that dividend investors should be…

Bank Stocks

These American Banks Are Better Buys Than Royal Bank of Canada and Toronto-Dominion Bank

July 22, 2015 | Benjamin Sinclair

You should trade your Royal Bank of Canada (TSX:RY)(NYSE:RY) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) shares for JPMorgan Chase & Co (NYSE:JPM)…

2 Top Dividend-Growth Stocks for Long-Term Investors

July 21, 2015 | Andrew Walker

Here's why BCE Inc. (TSX:BCE)(NYSE:BCE) and Bank of Montreal (TSX:BMO)(NYSE:BMO) are smart picks in the current environment.

Dividend Stocks

Is Now the Time to Buy Canadian Imperial Bank of Commerce?

July 20, 2015 | Nelson Smith

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is the cheapest bank in Canada. But there's a big reason why it trades…

Is Toronto-Dominion Bank Prepared for a Recession?

July 20, 2015 | Adam Mancini

Canada is technically in a recession, and while it may not last, a slow economy is a headwind for banks.…

Bank Stocks

5 Unbelievable Facts About the Toronto Real Estate Market

July 17, 2015 | Nelson Smith

Bullish on Toronto real estate, Home Capital Group Inc. (TSX:HCG), or Genworth MI Canada Inc. (TSX:MIC)? Then you've got to…

Bank Stocks

This Is a Golden Opportunity to Buy Canadian Banks

July 17, 2015 | Benjamin Sinclair

You should snap up Canadian banks like Royal Bank of Canada (TSX:RY)(NYSE:RY) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) while they're still unpopular.

Dividend Stocks

Canadian Western Bank Shares Have Fallen. Is This an Opportunity or a Value Trap?

July 16, 2015 | Kay Ng

Canadian Western Bank (TSX:CWB) shares have fallen more than 38%. Is this a compelling opportunity or a value trap?

Bank Stocks

Bank of Canada Rate Cut Could Pressure Canadian Banks

July 16, 2015 | Doug Watt

The Bank of Canada's decision to cut interest rates by 25 basis points could have a short-term impact on Canadian…

Dividend Stocks

Value Investors: 3 Stocks That Could Widely Outperform Their Industries

July 16, 2015 | Joseph Solitro

Are you looking to add a new stock to your portfolio? If so, Bank of Montreal (TSX:BMO)(NYSE:BMO), CCL Industries Inc.…

Dividend Stocks

Should Dividend Investors Hold Bank of Montreal or Canadian Imperial Bank of Commerce?

July 15, 2015 | Andrew Walker

Bank of Montreal (TSX:BMO)(NYSE:BMO) and Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) both offer an attractive yield. but one is a…

Dividend Stocks

These 3 Stocks Are Screaming Buys

July 15, 2015 | Joseph Solitro

Looking to add a new position? If so, Progressive Waste Solutions Ltd. (TSX:BIN)(NYSE:BIN), Macdonald Dettwiler & Associates Ltd. (TSX:MDA), and…

Dividend Stocks

3 High-Yielding Financial Stocks to Buy Today

July 14, 2015 | Joseph Solitro

Looking to add yield to your portfolio with a financial stock? If so, GMP Capital Inc. (TSX:GMP), Toronto-Dominion Bank (TSX:TD)(NYSE:TD),…

Bank Stocks

Why Did Home Capital Group Inc. Drop 15%?

July 13, 2015 | Nelson Smith

Home Capital Group Inc. (TSX:HCG) is a former market darling. Is the 15% decline the beginning of even more bad…

Should You Buy Toronto-Dominion Bank or Royal Bank of Canada Right Now?

July 13, 2015 | Andrew Walker

Toronto-Dominion Bank (TSX:TD)(NYSE:TD) and Royal Bank of Canada (TSX:RY)(NYSE:RY) are both top picks, but one is a safer bet right…

Dividend Stocks

Should Dividend Investors Bet on Bank of Montreal?

July 10, 2015 | Andrew Walker

Here's why Bank of Montreal (TSX:BMO)(NYSE:BMO) deserves a closer look.

Bank Stocks

Now Is a Golden Opportunity to Buy Beaten-Up Royal Bank of Canada and Toronto-Dominion Bank

July 9, 2015 | Benjamin Sinclair

Royal Bank of Canada (TSX:RY)(NYSE:RY) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) both have beaten-up shares, yet have been performing well.

Bank Stocks

How Is the Economic Downturn Affecting Canadian Western Bank?

July 8, 2015 | Doug Watt

Weak oil prices have hurt Alberta's economy and companies like Canadian Western Bank (TSX:CWB) are suffering.

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

July 7, 2015 | Andrew Walker

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) and Toronto-Dominion Bank (TSX:TD)(NYSE:TD) are both great stocks, but one is a safer bet…

3 Stocks That Have Increased Their Dividends for 20 Years or More

July 6, 2015 | Joseph Solitro

Canadian Western Bank (TSX:CWB), Metro Inc. (TSX:MRU), and Imperial Oil Limited (TSX:IMO)(NYSE:IMO) have increased their dividends for 20 consecutive years…

Dividend Stocks

How to Get a 5.2% Monthly Dividend Yield From the Canadian Banks

July 6, 2015 | Benjamin Sinclair

This dividend is better than the yields found at Royal Bank of Canada (TSX:RY)(NYSE:RY), Toronto-Dominion Bank (TSX:TD)(NYSE:TD), Bank of Nova…

3 Cheap Dividend-Paying Financial Stocks to Buy Today

July 3, 2015 | Joseph Solitro

Does your portfolio need a financial stock? If so, Manulife Financial Corp. (TSX:MFC)(NYSE:MFC), IGM Financial Inc. (TSX:IGM), and Canadian Western…

Dividend Stocks

3 Diversified Stock Picks to Add Growth and Income to Your Portfolio

July 2, 2015 | Joseph Solitro

Looking for stocks that can offer both growth and income? Laurentian Bank of Canada (TSX:LB), West Fraser Timber Co. Ltd.…

Dividend Stocks

3 Dividend Stocks to Buy and Hold Forever

July 2, 2015 | Joseph Solitro

Does your portfolio need more yield? If so, you should consider buying Rogers Sugars Inc. (TSX:RSI), Royal Bank of Canada…

Young Investors: Here’s an Instant 3-Stock Retirement Portfolio

July 2, 2015 | Andrew Walker

Here's why young investors can't go wrong with BCE Inc. (TSX:BCE)(NYSE:BCE), Toronto-Dominion Bank (TSX:TD)(NYSE:TD), and Canadian National Railway Company (TSX:CNR)(NYSE:CNI).

3 Growth and Income Stocks to Buy Right Now

July 1, 2015 | Joseph Solitro

Are you looking for a stock that can provide both growth and income? If so, National Bank of Canada (TSX:NA),…

3 Tips on How to Get a 100% Success Rate in Investing

July 1, 2015 | Kay Ng

To succeed in investing, make long-term investments in Enbridge Inc. (TSX:ENB)(NYSE:ENB) and Canadian Western Bank (TSX:CWB), and follow these three…

Bank Stocks

Canadian Imperial Bank of Commerce: Is it Time to Buy the Pullback?

July 1, 2015 | Andrew Walker

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is starting to look cheap, but earnings risks are on the horizon.

❮1…219 220221222 223…❯

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.