Prediction: The Best-Performing Big Bank Stock of the Next 2 Years Is Not JPMorgan Chase

JPMorgan Chase (JPM +0.10%) is the largest bank in the U.S., by far. It's a financial giant with robust consumer and commercial segments, and it's reliable in driving growth under pressure. It also pays a growing dividend that yields 1.7% at the current price, and it's a fantastic value addition to any investor's diversified portfolio.

While it's likely to become the first bank stock with a $1 trillion valuation in the near future (it currently sports a $927.5 billion market capitalization), there are smaller digital banks that are likely to grow much faster in the next two years, and probably a lot longer. SoFi Technologies (SOFI +1.38%) and Nu Holdings (NU -1.37%) are two of them.

1. SoFi Technologies

SoFi is a young digital bank that's growing at the rate of a tech start-up, which makes sense, since it's a combination of both -- a classic fintech company.

What started as a loan cooperative for college students has expanded into a comprehensive financial app for anyone seeking an easy-to-use digital platform. It's attracting new members at a fast pace, and its strategy of bringing customers into the ecosystem and getting them to adopt more products is working.

In the second quarter, it added 1.1 million new customers, a 35% year-over-year increase, and 2.2 million new products, the first time product growth was double customer growth.

Strong engagement with core products like loans and savings accounts, as well as new products like SoFi Coach and SoFi Plus, is driving higher overall growth and trickling down to the bottom line. Adjusted net revenue increased 40% year over year in the quarter, and earnings per share rose from $0.08 to $0.12.

The company continues to roll out new and innovative products and services that appeal to its younger target base, including many crypto and artificial intelligence (AI)-based ones. Some of its recent additions include new private market funds in its investment lineup and the acquisition of AI investing agent Composer.

New users and more products are a compelling combination that should drive higher growth for many years.

2. Nu Holdings

Nu is doing similar things to SoFi in Latin America, and it also plans to expand to the U.S. shortly. It's based in Brazil, and over the past 13 years, it has onboarded more than 60% of the country's adult population to its platform. Mexico and Colombia are the other two Latin American countries where it currently operates, and it remains to be seen how it approaches U.S. expansion.

The Brazil business is so profitable that it has supported the build-out of new locations while keeping the company profitable overall. In the meantime, the Mexican business is growing faster than Brazil did at the same point in its development. It was recently approved for a full bank charter in Mexico, and it's already the largest digital bank in the country.

It sees major opportunities in many ways. It's still adding millions of customers annually in Brazil, but it's focusing its efforts there on gaining more revenue per customer. Average revenue per active customer is still climbing every quarter, reaching $17, up from $13 last year.

It's still considered the bank for the mass consumer, and it's adding features to attract more business from higher-income users. It has launched two platforms for these users, Ultraviolet for affluent consumers and Croma for mid-level consumers.

It has also created its own custom large language model (LLM), NuFormer, that drives underwriting, strategic, and customer service decisions.

Revenue increased 39% year over year in the second quarter, and net income rose 49%, surpassing $1 billion for the first time. As it continues to enter new markets and use data to target the right customers, Nu should keep growing quickly and reward investors.