Assessing the Attraction of High-Growth Financial and Industrial Firms in Q3 2025

In Q3 2025, the interplay between digital banking innovation and industrial sector consolidation has created a compelling landscape for investors. High-growth financial institutions and diversified industrial conglomerates are navigating distinct yet interconnected challenges, from shifting interest rates to geopolitical disruptions. This analysis evaluates their strategic momentum and the sustainability of their profitability, drawing on recent financial performance and market trends.

Digital Banking: Deposit Growth and Margin Expansion

Digital banking firms have demonstrated resilience and agility in Q3 2025, with Customers Bancorp emerging as a standout performer. The bank reported a 15.6% return on common equity, driven by a strategic shift toward low-cost deposits. Non-interest bearing deposits surged to $6.4 billion, accounting for 31% of total deposits, while net interest margins expanded by 19 basis points to 3.46%-a trend that has persisted for four consecutive quarters, according to the Customers Bancorp slides. This deposit mix optimization has positioned Customers Bancorp to outperform regional peers, with projected full-year loan growth of 13-14% and deposit growth of 8-10%.

However, not all digital banks have fared equally well. Popular Inc., while reporting strong earnings per share of $3.15 and a 4% stock price increase, faces credit quality headwinds. A spike in non-performing loans, particularly in its Puerto Rico operations, has pushed the NPL ratio to 1.30%, according to the Popular Inc. slides. This underscores the sector's vulnerability to regional economic shifts and the importance of robust risk management frameworks.

The broader digital banking sector is also innovating to diversify revenue streams. BMO Financial Group launched the BMO Broad Commodity ETF, offering investors exposure to energy, metals, and agricultural markets. This product aligns with industry trends toward alternative investments and transparency, potentially broadening the appeal of digital banks beyond traditional lending.

Diversified Industrial Conglomerates: Consolidation and Operational Efficiency

Diversified industrial conglomerates have leveraged Q3 2025 to strengthen supply chains and capture cost synergies through strategic acquisitions. The sector recorded 312 deals in the quarter, with 1,428 deals over the past twelve months, maintaining median valuations at 12.38x EBITDA and 1.78x revenue, according to a PCE Investment Bankers report. Notable transactions, such as SRS Distribution's $5.9 billion acquisition of Gypsum Management & Supply, highlight a focus on logistics optimization and vertical integration, the PCE report noted.

Investor interest in the sector remains robust, driven by recurring revenue from maintenance services and aftermarket solutions. PCE Investment Bankers reports that businesses with exposure to resilient end markets-such as infrastructure and manufacturing-are attracting premium valuations. However, risks like tariff escalations, input cost volatility, and labor shortages threaten margin stability, the report warned. Despite these challenges, infrastructure policy tailwinds and stabilized industrial production are expected to sustain moderate growth in construction and specialty services, PCE Investment Bankers projects.

The EV Revolution in India: A Hidden Growth Engine

While the focus remains on digital banking and industrial conglomerates, a parallel transformation is unfolding in India's electric vehicle (EV) market. Engineering firms like KPIT Technologies and LTTS Technologies are pivotal in developing software-defined vehicle solutions and electrification systems, according to a Financial Express article. The EV market is projected to grow from $2.3 billion in 2024 to $164.4 billion by 2033, driven by government mandates and infrastructure development, the article notes. This surge underscores the industrial sector's potential to diversify into high-growth, technology-driven markets.

Strategic Momentum and Profitability Sustainability

The strategic momentum of high-growth firms in both sectors hinges on their ability to adapt to macroeconomic pressures. Digital banks must balance margin expansion with credit risk management, while industrial conglomerates need to navigate supply-chain complexities without sacrificing operational efficiency. For investors, the sustainability of profitability will depend on:

1. Digital Banking: Continued deposit growth and innovation in alternative investment products.
2. Industrial Conglomerates: Execution of cost synergies from acquisitions and resilience in recurring revenue streams.

In Q3 2025, both sectors have shown promise, but their long-term success will require agility in addressing sector-specific risks.