Bank stocks are a very specific category that stands out in a number of ways. Bank stocks are typically cash-rich and well-established, and they often pay dividends. They're the kind of reliable stocks that usually add value and protection to a portfolio because they provide an essential service that drives the economy.
However, investors have seen during the past few years that not all bank stocks are alike, and some can actually be very risky. If you do buy the right ones, though, they can offer high value. Famed investor Warren Buffett loves bank stocks, and they make up a large percentage of his portfolio.
I recommend Buffett stock Bank of America (BAC -0.44%) and newcomer SoFi Technologies (SOFI -3.25%) as two excellent bank stocks to buy right now.
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1. Bank of America: Buffett's favorite bank
Bank of America has slipped from being Buffett's second-largest holding into fourth place after Berkshire Hathaway sold some shares last year, but it still accounts for 10% of the total portfolio, and investors shouldn't think that Buffett has lost confidence in this favorite.
It's the second-largest U.S. bank by assets, giving it incredible financial strength. It's a bank you can count on, as millions of users rely on it to manage their finances. That consumer focus is likely one of the reasons Buffett likes it so much. Deposits increased 2% year over year in the 2025 first quarter. Despite its size and millions of customers, it added 250,000 consumer checking accounts in the first quarter, which was its 25th consecutive quarter of growth. It also added 1 million credit cards. BofA has invested in its digital channels, and its platform is resonating with U.S. customers. In its global wealth and investment management group, it opened 27,000 new accounts, and assets under management increased 7% from last year to $1.9 trillion.
But it's increasingly turning toward institutional services in its expanded platform, driving higher growth and beefing up the overall business, making it an even more serious contender as a U.S. financial services giant.
Banks typically do well when the economy is strong and people are making and spending money, and they feel pressure as a category when interest rates are high and the economy slows. The flip side of that is that banks make higher net interest income when interest rates are higher, although that doesn't usually outweigh the negative effect of lower borrowing. Bank stocks are cyclical that way, although since the economy is in growth mode more often than not, banks do well more often than not.
In the current environment, where interest rates have remained high despite recent cuts, Bank of America is back in growth mode. Revenue increased 6% year over year in Q1, and earnings per share rose 18%. Common equity tier 1 (CET1), which is an indication of stability, was 11.8% in the quarter, or well above regulatory minimums, and return on common tangible equity was a healthy 13.9%.
Bank of America also pays an attractive dividend that yields 2.3% at the current price and has increased 420% during the past 10 years. Finally, it's a bargain at the current price, trading at only 13 times trailing 12-month earnings.
2. SoFi: The digital upstart
SoFi is a completely different kind of bank. It's young (and therefore less stable), it's all digital, and it doesn't pay a dividend. It's a growth stock, and it offers a different blend of benefits for investors.
Since it's just starting out, SoFi has only $27 billion in deposits, or a tiny percentage of Bank of America's $1.9 trillion. However, that's a 40% year-over-year increase, versus 2% for BofA.
It's growing quickly in every way. Members increased by 800,000 in Q1, or 34% year over year, to a total of 10.9 million, and adjusted net revenue rose 33%. It's now fully profitable, and adjusted earnings per share increased from $0.02 last year to $0.06 this year.
Much of the growth is coming from the company's financial services segment. SoFi has expanded its platform from its origins as a lender to offer a full assortment of financial services, and this segment, which is fee-based and low-cost, is driving growth and profitability. It offers a broad array of non-lending services like bank accounts and investing tools, and it continues to upgrade the user interface and functionality to attract new business and boost engagement. Segment revenue increased 101% in Q1, while contribution profit was up 299%.
The loan business is still SoFi's largest, and although it was under pressure last year, it's demonstrating strength right now. Credit metrics are improving, and the segment is growing, with revenue up 25% and contribution profit up 15%.
SoFi isn't your typical bank stock, but it's on its way to becoming one. Digital is the future of banking, and SoFi has an edge since it was created to offer digital interaction from its foundation.
