Bank stocks seem to be on the path to recovery, and that’s great news for investors in many ways. However, the downside is that Canada’s biggest banks can fall drastically during times of trouble. So, while they’re up now, those who say they are going to need their cash in another decade may not be as interested.
Weak economy in 2024
Analysts are now seeing 2024 as a weak year for the economy, and lenders continue to set aside money for provisions for loans. These will likely be needed should the banks see defaults on loans or job cuts that see Canadians cut back on expenses.
During the fourth-quarter results for the banks, uncertainty remained for just how much the economy could fall during 2024. Banks continued to post lower profits and saw a decrease in loan repayments. Therefore, while banks are climbing, that may not be for long — especially as we continue to see higher credit losses.
Yet even still, some investors are still sitting on savings after growth during the pandemic. This has led them to try to put their money to good use, especially during a time of higher interest rates. That may not include the banks should more bad news come down the pipeline. And it already has.
All the major banks have experienced rough times during the last few months. This has included major job cuts as well as a tighter regulatory environment. Further, many are experiencing enormous fines for anti-money-laundering measures.
Add into this a slew of new taxes and costly regulatory changes, and the banks are in a dire situation indeed. Of course, this is all to help Canadians in a risky scenario, but it’s hitting the bank’s bottom lines. So, profit growth has slowed significantly for most of the banks, prompting lenders to cut back in every way possible.
Invest here instead
Instead of investing in Big Six banks that remain in a risky scenario, I would consider growth stock goeasy (TSX:GSY) instead. The stock has been an outperformer for the last year but is set to climb even higher throughout 2024.
The stock looks well positioned for high three-year loan growth in the future as well as record originations quarter after quarter. The stock has also managed to achieve stable credit performance, with its plans to achieve a return on equity near 21% through 2025 remaining solid as well.
Yet, with shares trading at just 13.46 times earnings, it remains a steal, even with shares up 43% in the last year alone. Meanwhile, you can also grab a 2.42% dividend yield. Add on that this stock has been around for decades, and it’s certainly a growth stock I would foresee only growing higher in the years and, indeed, decades to come.