Bank of America (BAC)

Net interest margins have been collapsing as rates have fallen, and as a result, the earnings have just come in. They have other lines of business such as asset management, but they are extremely competitive areas. This has been trading cheaply for a long time now, a little bit above BV. He likes the name, but you are going to have to be very patient. Rates are going to have to go up and he thinks you will be rewarded. If you can put a 3-5 year time horizon on this investment, you will do well.

You are safe with this. The share price really hasn’t done much over the last 52 weeks, and year-to-date is down about 8%-10%. There is nothing wrong with the entry-level at this point. Trading at around 12X, but you are getting a lousy yield of around 2%. Also, if you are Canadian, you don’t get the dividend tax credit. In the short term there might be a bit of an upside. He would prefer some of the US regional banks.

(A Top Pick Sept 8/15. Down 2.05%.) He still likes the US banks, but his preference now would be J.P. Morgan (JPM-N), Wells Fargo (WFC-N) and some of the others. The issue with US banks has been sentiment related. The money centred banks in the US are exceptionally well capitalized. Because US banks are so well capitalized, they are going to take market share away European counterparts, where the risk rated asset calculations are probably a lot less conservative than they are in the US.

The sector has been so regulated recently that it will not be affected by a new president. The sector has reduced risks now and the valuations should be higher. This one is trading at a discount to its tangible book value. It is worth holding onto. The currency risk is keeping him out of it.

A cheap stock by any valuation metric you want to use. What has hurt the banking industry short term in the US this year is that the federal reserve increased rates in December and everybody thought the yield curve would steepen. The yield curve actually flattened and really hurt the banks. There are 2 things this bank will definitely do; ROEs will slowly increase and dividends won’t increase as much as people think.

Bond yields are likely to slowly work higher, and financials are the most positively impacted by a rise in yields. This one looks really attractive and he considered making it a Top pick today. Loan growth is solid in the US. This had recently been run as though rates are never going to go higher, so have been focused on cost cutting and ways to be more profitable in a low interest rate environment. You are likely to see good dividend growth with all the US banks. This one also has capital market exposure, and with his view that we are in a bull market for stocks, there is likely to be lots of M&A and underwriting of new issues.

This is having a little bit of a lift now with the idea of a rising rate environment. All the US banks have been mired in regulatory problems, and it has only been about a year ago that they stopped talking about that.

This is one of her lesser favourite diversified financials, and she sees this as Fair Value at this point. They have very low net interest margins. Although she sees mortgage applications being very strong, this bank has not been able to take advantage of that, because of low interest rates. She is not a big fan of this bank.

They rallied last week because of the expectation of raising rates. The only problem he has is that it is under EBV-3. He wants to see a positive transit above this.

A classic technical analysis rule is that old support, when it is broken, becomes resistance. That happened earlier this year. The chart looks like it is trying to break that resistance of around $15. If true, the next target would be the old level of resistance. This looks like it just might do that.

If US interest rates rise, banks might go up. However, if people believe there will be a rate hike and there won’t be another for another year, you could possibly see them fall off afterwards. This is very undervalued and is trading below tangible Book. At some point, people will recognize that these banks can still generate enough earnings to pay dividends. This one has been allowed to up their dividend, and will continue to do so and will do a catch up with some of the other big banks. They are also doing buybacks.

A large, bulge bracket US bank with capital market banking and mortgage underwriting. There is an activist investor wanting to improve returns and margins and to get management better focused. He prefers WFC-N. He is more pre-disposed to US banks because of the recovering economy. He thinks the US Fed will raise rates in December.

There has been a lot of negative sentiment around the US banking sector, particularly with a very flat yield curve and a low absolute level of interest rates. It has made a challenge for banks to earn those higher net interest spreads that people have been waiting for. With higher rates, they are gradually going to earn higher interest margins, and the sentiment in the sector will change. This bank is in a good position to benefit from those trends.

With US banks, it is really a call on interest rates. Coming into the year they had some strength with expectations for interest rates going up, but that got completely deflated resulting in some pressure. They are under such attack from multiple levels, such as rates and regulations. There is also the fintech angle. However, valuations are well below BV. Thinks the group will be lumpy, but years out she expects they will be higher.

Chairman and CEO is the same. He is a fan of these being separated. Feels that once these positions have been given, if you separate them it would feel like it was a demotion. The real question is, how strong is the board. He is a fan of stronger boards.