2 Top Financial Stocks to Buy on the TSX Today

Two outperforming financial stocks, but not giant lenders, are the top buys on the TSX today.

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The TSX gained nearly 1% to start the second half of October 2023 due to a broad-based rally. Healthcare, technology, and financial stocks led the charge as a new earnings season kicks off. In a high interest rate environment, many expect the big bank stocks to dominate. However, smaller lenders outperform giant lenders instead.

EQB (TSX:EQB) and Propel Holdings (TSX:PRL) are the top financial stocks to buy today. Besides the market-beating returns, both companies pay decent dividends. You can earn considerable windfall from price appreciation and receive passive-income streams.  

Growing customer base

EQB, through its wholly owned subsidiary Equitable Bank, provides residential and commercial real estate lending and personal banking services. At $73.77 per share, current investors delight in the 32.21% year-to-date gain and partake in the 2.1% dividend.

The $2.78 billion financial institution reported record earnings in the second quarter and the first half of 2023. In the second quarter (Q2) of 2023, net income rose 112.5% to $130.9 million versus Q2 2022. For the six months that ended June 30, 2023, EQB’s net income increased 57% year over year to $230.44 million.

Because of the impressive financial performance, the board approved a 23% hike in the common share dividends. According to management, EQB is providing better value from the banking industry at a time when Canadians need it more. Besides the no-fee, high-interest EQB digital services, the fully digital First Home Savings Account for affordable housing is gaining ground.

The “Make Bank” marketing campaign was highly successful, as EQB’s customer base grew 31.1% year over year to 367,790 due to strong account opening momentum. Moreover, customer engagement in the EQB Card with mobile wallet technology is rising.

“Significant growth in our customer base, strong customer engagement and our plans to continue to bring innovation to the market give me well-founded confidence that we are set to thrive in the years ahead,” said EQB’s president and chief executive officer (CEO) Andrew Moor.

Moreover, EQB is well reserved for credit losses as its provision for credit losses (PCLs) increased 277.6% to $19.3 million from a year ago. Last, this financial stock has delivered enormous gains to investors. At its current share price, the overall return in three years is 95.39%, or a compound annual growth rate (CAGR) of 24.99%.

AI-driven technology

Propel Holdings, one of Canada’s top-growing companies, deserves investors’ attention for its stable performance amid massive headwinds, including rising interest rates and stubborn inflation. At $8.32 per share, the year-to-date gain is 15.87%. If you invest today, you can partake in the juicy 4.81% dividend yield.

The $294.5 million financial technology company continues to impress with record revenues and glowing earnings. In Q2 2023, revenue and net income increased 33% and 183% to US$71.7 million and US$5.7 million versus Q2 2022. Strong consumer demand drove volume growth.

“Since day one, we have set out to build opportunity for consumers previously locked out of the credit market. We brought the best of finance and AI [artificial intelligence]-driven technology together to build real solutions for millions of everyday consumers,” said Clive Kinross, Propel’s CEO. He added, “We’re just getting started.”

Unstoppable momentum

Big bank stocks yielded centre stage to smaller lenders in 2023. Despite a challenging operating environment, EQB and Propel Holdings’s upward momentum seems unstoppable.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Propel. The Motley Fool recommends EQB. The Motley Fool has a disclosure policy.

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