The TSX Index of stocks has a plethora of financial stocks. In fact, Canada is quite well known for its highly regulated and well-managed financial industry. Whether it be its many banks, asset managers, insurance providers, or lenders, there are plenty of interesting financial companies.
If you are looking for some high-quality financial stocks to add to your portfolio, here are three to look at right now.
A TSX insurance stock with a huge growth record
Most Canadians have likely never heard of Trisura Group (TSX:TSU). With a market cap of only $2 billion, it certainly isn’t the largest insurance business. However, it makes up for it with excellent returns, strong growth, and above-average profitability.
Trisura’s stock is up 469% over the past five years. The last couple of years have been volatile. However, on average, this company has delivered for shareholders.
In Canada, it has a platform for surety, corporate, and specialty insurance. In the U.S., it has a fronting business. It recently added a platform to grow its surety and specialty insurance capacity in the States.
Trisura consistently earns a high-teens to mid-20% return on equity (ROE). It has a low ~80% operating combined ratio (incurred losses divided by premiums earned (the lower the better)).
This company is very profitable, and it still has a large market to grow into. Trisura trades at a significant discount to other similar peers in the U.S. It could enjoy a strong re-rating if it successfully executes its growth plan.
A TSX fintech stock growing like crazy
Another TSX financial stock that has recently delivered stellar results and returns is Propel Holdings (TSX:PRL). Canada does not have many fintech companies that are both profitable and growing, so this one stands out. Its stock is up 92% in 2024 alone.
Propel provides small-to-medium sized loans to the generally riskier non-prime consumer market. The lender manages the higher lending risk with a proprietary artificial intelligent (AI) underwriting platform. It factors in a wide mix of data that help give it better certainty around successful loan repayment.
Propel has been quickly growing in the U.S. However, the financial services firm just added a lending platform in Canada. It also offers a lending-as-a-service platform to other banks and financial institutions.
Propel grew earnings per share by 72% last year. It is targeting 25 to 30% loan growth in 2024. Likewise, it expects margins to expand. Earnings per share could rise by over 50% in 2024.
PRL operates in a riskier segment, but it also has a substantial reward attached. The stock can be volatile, but its valuation is not unreasonable here.
A challenger bank in Canada
EQB Inc. (TSX:EQB) operates as EQ Bank. It is known as the challenger bank in Canada because of its online-only, branchless banking and lending platform.
The bank has been able to deliver solid total returns. EQB stock is up 134% over the past five years. Its dividend per share has increased by 105% in that time.
Since it has no physical branches, it can generate a strong high-teens ROE. EQ Bank caters its loans to new Canadians, businesses, and individuals with uncommon lending characteristics. As Canada’s population has grown, EQB has enjoyed a strong rise in demand for its low-fee banking platform.
EQB is very well-managed and positioned to continue to gain market share in Canada. It trades at a discount to the Canadian big banks so it could deserve an up-rating as it proves its business model over time.
