Bank stocks as a category aren't usually high-growth investment vehicles. When individuals look to buy bank stocks, it's usually with their stability and, perhaps, a dividend in mind. However, not every bank stock is reliable, and not every bank stock is a slow grower.
If you're looking for some great bank stocks, I recommend Ally (ALLY -2.41%), which is your reliable dividend-paying bank stock, as well as Nu Holdings (NU 0.99%) and SoFi Technologies (SOFI 2.77%), which are both excellent growth stocks.
1. Ally: The dividend pick
Ally is a stock pick of investment legend Warren Buffett, and it's easy to see why. It has a strong role in the American economy as the top prime auto lender, and it has roots that are a century old as the financial arm of General Motors. Buffett loves old, established companies, and he loves banks.
But it's not just an old company. It launched an all-digital bank -- the largest in the U.S. That puts it firmly in the fintech camp and gives it tons of growth potential. As of the end of 2024, it has reached $143 billion in consumer retail deposits with a 95% consumer retention rate. It's a compelling mix of old and new, providing security and new opportunities.
NYSE: ALLY
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It also pays an attractive dividend that yields 3.3% at the current price, an important feature for Buffett, and it appears to be undervalued stock, another feature Buffett is known for appreciating. It trades at a P/E ratio of 14 and a price-to-book ratio of 0.9. Ally could be an excellent value pick for investors looking for a solid bank stock.
2. Nu: High growth in Latin American
Nu is an all-digital bank that's headquartered in Brazil and also operates in Mexico and Colombia. It's constantly adding millions of customers and growing at incredible rates, and it has a huge growth runway between adding more members, cross-selling new products, and entering new regions.
Revenue increased 50% year over year in the 2024 fourth quarter, and net income increased from $360.9 million to $552.6 million. Average revenue per active customer (ARPAC), which tracks the cross-selling component, increased 23% (currency neutral) year over year to $10.70. That's even more impressive because it adds so many new members.
NYSE: NU
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It also has a full line of credit products that are demonstrating strong performance. Loan originations increased 84% year over year in the fourth quarter, and the interest-earning portfolio was up 57%.
Nu has lost some market confidence recently since Berkshire Hathaway sold more than half of its shares in the fourth quarter, and investors are concerned about he devaluation of the Brazilian real. The stock is flat over the past year, and it's an excellent time to scoop up shares.
3. SoFi: The next "top 10" bank
Continuing the trend on this list, SoFi is an all-digital U.S. bank that's young and fast growing. It's reporting high sales and earnings increases, and it continues to attract new members at a high rate.
It ended 2024 with 10.1 million members, a 34% increase over last year, and 14.7 million products, a 32% increase. Cross-selling is an important element of its growth strategy, and it has expanded over the past few years beyond its core lending segment to ease some of the risk associated with being only a lender as well as generate more growth opportunities.
The financial services segment, which is all non-lending services for individual accounts, has been a star, increasing 84% year over year in the 2024 fourth quarter.
NASDAQ: SOFI
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Investors have been worried about the lending segment last year, but it ended up surpassing management's expectations, and lending segment revenue increased 18% year over year in the fourth quarter.
All of the company's segments are growing, and as interest rates start coming down, SoFi is well-positioned for a strong 2025. Even better, it's poised to become a real player in banking long-term, with management aiming to become a "top 10" U.S. bank, and investing now could pay off later in a big way.
