1 TSX Stock That Could Thrive Even if the Economy Slows

Stocks that can thrive when the economy slows usually don’t need perfect conditions to keep working. They serve basic financial, consumer, or business needs. These stocks have steady revenue, solid balance sheets, and enough pricing power to protect profits when growth gets harder. Banks can fit that mould, but only when investors choose carefully. The strongest picks tend to have stable deposits, disciplined lending, and a clear plan to improve returns.

LB

Laurentian Bank (TSX:LB) is one of Canada’s oldest financial institutions, with roots in Quebec and a history stretching back more than 175 years. It offers banking services across personal, small business, commercial, capital markets, equipment financing, and intermediary services. Yet the bank stock now looks very different from the traditional regional bank investors once knew. Over the last year, Laurentian moved deeper into a major reset after years of uneven performance, technology issues, restructuring costs, and investor frustration.

The biggest news came in December 2025, when Laurentian announced a major strategic shift. National Bank agreed to acquire its retail and small- and medium-sized business banking portfolios, while Fairstone Bank agreed to acquire all Laurentian common shares for $40.50 in cash. The move turns Laurentian’s story into something unusual. It’s partly a bank turnaround and partly a takeover situation. That can appeal to investors who want more certainty in a shaky market, though it also means the upside now depends heavily on the deal closing as planned.

Into earnings

The latest earnings show why the market still treats Laurentian carefully. In the first quarter of fiscal 2026, the bank stock reported total revenue of $251.6 million, up only slightly from $249.6 million a year earlier. Net interest income rose 5% to $194.9 million, helped by better margins and a changing business mix. However, restructuring and transaction costs pushed the bank to a reported net loss of $20.5 million, or a diluted loss of $0.58 per share. Those numbers don’t look pretty at first glance, but they reflect a business in transition rather than a normal quarter.

On an adjusted basis, Laurentian looked steadier. Adjusted net income came in at $34.2 million, while adjusted diluted earnings per share (EPS) reached $0.65. The common equity tier one ratio stood at 10.9%, giving the bank a reasonable capital cushion as it works through the deal process. Valuation also looks tied closely to the takeover. Laurentian recently carried a market cap near $1.8 billion, with a trailing price-to-earnings (P/E) ratio around 28. The $40.50 cash offer also gives investors a clearer reference point than usual, with shares at $40.30 at writing.

Future focus

Looking ahead, Laurentian’s future depends less on normal bank growth and more on execution. If the transaction closes, shareholders receive cash and avoid the long grind of waiting for the turnaround to fully prove itself. That’s part of what makes LB interesting in a slowing economy. It doesn’t rely only on loan growth, rate cuts, or a sudden rebound in consumer confidence. The bank stock has a defined catalyst, and that can matter when the broader market feels messy.

Still, investors should not ignore the risks. Deals can face delays, regulatory reviews, shareholder concerns, or unexpected market shocks. Laurentian’s underlying business also remains under pressure, with modest revenue growth, elevated expenses, and a long history of weaker profitability compared with Canada’s larger banks. Yet the bank stock’s commercial focus, capital position, and pending cash offer make it more defensive than it looked a few years ago. It’s not a classic buy-and-hold bank stock anymore. It’s more of a special situation built around value realization.

Bottom line

Laurentian Bank may not be the flashiest TSX stock, and it’s certainly not risk free. But in an uncertain economy, investors often want clarity, cash flow, and catalysts. LB offers all three in a very specific way. Its turnaround alone would have taken patience. The pending acquisition gives the story a clearer finish line. Meanwhile, investors can grab income from its 4.7% yield even with $7,000.

COMPANYRECENT PRICENUMBER OF SHARESANNUAL DIVIDENDANNUAL TOTAL PAYOUTFREQUENCYTOTAL INVESTMENTLB$40.31173$1.88$325.24Quarterly$6,973.63

For investors comfortable with deal risk, this TSX stock could hold up better than many expect if the economy slows.

The post 1 TSX Stock That Could Thrive Even if the Economy Slows appeared first on The Motley Fool Canada.

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