Currently, the rising interest rates have made lending credit profitable for banks and enabled them to generate higher revenue. But with an impending recession in the near future, purchasing bank stocks can be a tough choice for most investors.
However, there are certain banks with strong fundamentals that can provide market-beating returns, even in these uncertain times. Let’s dive into their fundamentals to explore their potential.
Toronto-Dominion Bank (TSX:TD) has recorded significant net income growth in the first quarter of 2023 with a rise of 7% in comparison to the same quarter last year, reaching a value of $1.7 billion. Additionally, for its U.S. division, the growth rate has been 25% compared to last year with the figures reaching $1.6 billion.
The bank has also implemented several schemes to fuel its long-term growth. For instance, TD’s Canadian division has decided to enter an exclusive partnership with CanadaVisa to assist people who are new to this country by providing financial services.
Apart from this, the banking giant has also initiated the Black Entrepreneur Credit Access Program in Canada. It is a scheme which offers entrepreneurs who are of colour improved access to credit facilities, financial advice, and wealth management.
Additionally, as per an article dated March 1, 2023, TD has completed its acquisition of Cowen Inc., an elite global research organization. This acquisition can help improve TD’s sales with the introduction of a trading and execution platform, which, in turn, can help to develop a deeper relationship with the clients.
Bank of Nova Scotia
Another banking stock that investors can consider a viable alternative is Bank of Nova Scotia (TSX:BNS). According to an article dated February 28, 2023, BNS has announced dividend payments on outstanding shares. It is payable on April 26, 2023, and will be available to shareholders of record on April 4, 2023.
For common shares, the applicable dividend will be $1.03/share and for non-cumulative preferred shares, it will be $0.303125/share. Stakeholders also have the option to go for additional common shares of the bank instead of receiving cash payments.
Apart from that, Nova Scotia’s newly appointed chief executive Scott Thompson has also announced that the bank will be rethinking its policies to cut down on its expenses and facilitate revenue growth. They may include the Scene Plus loyalty program that will help add new customers and thus boost deposits. To increase its capital ratio, the bank has already introduced a 2% discount for shareholders who wish to opt for the dividend-reinvestment program.
Despite the ongoing economic situation, both these banks have shown noteworthy performance. They have development plans in action, which can help achieve significant future growth. Thus, investors can choose either one depending on their risk tolerance.