Max Out Your TFSA With 2 Canadian Bank Stocks Poised for Huge Growth

Two under-the-radar Canadian lenders that could offer faster growth and steadier dividends than the Big Six are ideal for TFSA investors.

Key Points
  • EQB’s digital model keeps costs low, attracts deposits with higher rates, grows earnings, and supports regular dividend hikes at a reasonable payout.
  • First National earns steady fees from originating and servicing mortgages, pays reliable dividends with occasional specials, and has managed cycles with disciplined underwriting.
  • Both trade at discounts to bigger banks, offering TFSA investors stable income today and long-term growth potential if housing and deposit growth stay resilient.

Bank stocks have long been some of the top-notch choices for Canadian investors. The Big Six Banks in particular have been around for decades, even centuries. Yet that doesn’t mean investors should ignore the smaller options making their way through the markets. So today, we’re going to look at two choices that belong in any Canadian portfolio, but should do especially well for Tax-Free Savings Account (TFSA) holders seeking growth.

Piggy bank with word TFSA for tax-free savings accounts.

Source: Getty Images

EQB

EQB (TSX: EQB) runs a digital-first banking model through EQ Bank, so it doesn’t carry the heavy branch costs that weigh down the Big Six. That lets it offer higher interest rates to attract deposits while still keeping margins healthy. Every quarter, it pulls in more customers because people want simple, low-fee banking, and that steady inflow of deposits helps fund a growing lending book.

At the same time, EQB has been steadily increasing earnings for years, and management has a clear habit of rewarding shareholders for that growth. Its dividend has climbed regularly, which shows confidence in future cash flow rather than one-off strength. The payout ratio stays conservative, so the bank isn’t stretching itself to maintain the dividend, and that leaves plenty of room for more hikes ahead.

On top of that, because the bank stock has historically traded at a discount compared with the big banks, long-term investors often get the advantage of buying a fast-growing company at a valuation that doesn’t fully reflect its trajectory. That combination is rare in the Canadian banking sector, where most names move slowly.

FN

First National Financial (TSX:FN.PB) is Canada’s largest non-bank mortgage lender, which gives it a unique spot in the market. It doesn’t take deposits or run branches, so it isn’t weighed down by the capital requirements or overhead that traditional banks carry. Instead, it focuses on originating high-quality mortgages and earning predictable servicing fees. That steady fee stream means revenue doesn’t swing wildly with interest rates, and the bank stock often surprises investors with how resilient it is in tougher markets.

What makes FN especially attractive for dividends and capital growth is the way it treats shareholders. Management has a long history of paying out generous monthly distributions, and it regularly tops those up with special dividends when earnings run ahead of expectations. At the same time, the market tends to value FN at a discount compared with the big banks, even though its earnings growth has often moved faster.

There are risks, of course. FN is tied to the housing market, so headlines about home prices or rate changes can nudge the stock around. But the company has managed through multiple cycles with a very disciplined approach to underwriting and risk management, and that’s why it has kept growing even when the broader real estate narrative gets noisy.

Bottom line

These two bank stocks might not be the biggest headline grabbers, but they offer one thing: stability. Each provides stable dividends that investors can look forward to quarter after quarter. In fact, here’s what $7,000 could bring in at writing.

COMPANYRECENT PRICENUMBER OF SHARESDIVIDEND TOTAL ANNUALPAYOUTFREQUENCYTOTAL INVESTMENT
EQB$86.0881$2.20$178.20Quarterly$6,972.48
FN$23.00304$1.20$364.80Quarterly$6,992.00

So if you’re looking to find bank stocks with a longer runway for growth, it’s time to wake up and consider these two for your watchlist.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends EQB. The Motley Fool has a disclosure policy.

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