Bank of America (BAC)

After tech, the next great earnings will come from financials. Rates will moderate, spreads will continue. Broker dealers are a great business. BAC and GS are his top picks among American banks. There's a long runway for financials.

The banks are positioned well this year. BAC is one of the leaders. BAC has little exposure to private credit or software/AI were CDS's are blowing out. 

The US banks are only okay. They have around 7% total returns. Citi is the turnaround story that's finally turning around. BAC is a more stable. Citi has a more global footprint. He wouldn't buy either. Valuations are a little rich. You will get stable returns, though misses at earnings from high expectations. Are better opportunities elsewhere. 

It plays second fiddle to JPM. Trades at 1.3x book and 14 PE, so not expensive. The US is loosening banking regulations, so banks can buyback more shares or raise dividends or expand into other businesses. Credit cards and retail banking continue to do well.

Last quarter was a blowout, profits rose 17% -- best EPS in nearly 2 decades, best trading quarter in 15 years. Great guidance. Sees 22% upside. Should continue to do well, wait for a pullback to add.

Of the two, he'd prefer BAC. However, both are distant runners-up to JPM.

Midterms shouldn't have a huge impact on money-centre banks, regardless of who holds the balance of power. Lower interest rates and a steeper yield curve are very constructive for the banks, and BAC is best able to take advantage of that. Makes its net interest margin prospects very good.

All banks were hurt somewhat by private credit worries and prospects of few rate cuts this year.

US banks haven't been performing as well as Canadian banks right now. Headwinds from slowing economy among the middle-lower class. Fear of private debt, as a lot of the big banks offer that type of fund.

What matters is direction of interest rates (lower means more business plus lower mortgage payments) as well as drop in USD (attracts foreign investors). Wait-and-see come May, when new Federal Reserve chair takes the helm. If rates are cut, US banks should come back to life.

Its valuation is 11X earnings and trades at a discout to JPM. It is working on taking over JPM's playbook and inter-connecting dominant brands.

Fallen slightly below its 200-day MA, so keep an eye on that. Benefits from strengthening economy and deregulation. Yield is 2.4%, expects that to be solid going forward.

Citi is the most technically sound among peers.

Sensitive to net interest margins and a steeper yield curve. Loan growth and total deposits are doing very well and improving. Now is a good entry point. Valuation is historically low.

Still more upside. Deregulation in the US means they need to hold less capital so they can buy back shares or increase dividends. Foresees more M&A in the sector. Capital markets business thrives in this volatility.

He's out of US financials, but this would be his second choice behind Citi.

Most banks have rallied strongly over last year and a bit, so yields have come down. As we look toward midterm elections, typically Republican governments are good for deregulation (allowing banks to invest more and grow faster). Strong business, especially as the IPO pipeline is opening up this year. Solid hold. Yield is 2.3%.

He owns MS.