Gordon ReidBank of AmericaBACCOMMENTJul 17, 2013

He added the past week when it fell 10%. To focus instead on the net interest margin pressure of late and not buy is a missed opportunity. Investments in AI now will pay off with increased efficiency in later years.

Very well run. Big banks can't win in every segment every quarter. Rising rates create a problem for banks, both in loan books and securities portfolios. Earnings were a bit sloppy, but no cause for alarm. Reasonable PE of ~10x. Very strong dividend yield. Strong balance sheet.

Makes sense to add on a pullback.

It was hit with a $1.2 billion fine for money laundering. They just reported a top and bottom line miss with earnings down 13% the past year. Net interest income and non- both missed. Investment banking fees fell 11%, sales and trading -5% and commodities and fixed income -17%. Not a good quarter.

All bank margins have been hurt by quick rise in the price of money, which slows down lending and moves funds to GICs. He trimmed a bit. When the AI mania breaks, the S&P doesn't do very well, and people go to the bond market, he wonders how that's going to affect advisers and banks (who rely on trading volumes).

Chart continues to look quite constructive, in an upward trend channel. Broadly, starting to see rotation from growth to value. Banks are putting up pretty impressive earnings numbers, so they could still run.

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.