Bank of America (BAC)

Have a big settlement coming with the US government. Also, had a hiccup filing their capital plan, where they were originally approved and then had to refile. As a consequence they are not allowed to do a buyback, but are allowed to raise the dividend. There are still some headline risks. Over the next 1.5 years, where he thinks the market will start to discount higher rates, this will be positive for the big banks. If you are willing to look further out, US banks are still cheap. He prefers Citibank (C-N).

Likes this. Sold his holdings recently when it ran up into the $16-$17 area, but is looking at a point for when to buy it back. There is earnings potential in the $1.80-$2 range. Still a lot of costs they can cut and can generate some earnings growth.

Bank of America (BAC-N) or HSBC Holdings (HSBC-N)? This is one that is not of interest to him. He doesn’t care for their business model. In the US, he prefers regional banks that make their money through loans in their region. He owns some HSBC, and is looking at this as a possibility for the rest of his accounts, as it gives European and Asian exposure.

Trading below Book Value. Currently trading right on the cusp of being in a condition of being rejected by the market, and being accepted by the market. If it can break through about $17-$18, the stock has a terrific run ahead of it.

The only financial that he owns is Goldman Sachs (GS-N). Expecting that over the next year or 18 months, he will have more of an exposure to the money centered banks. Feels that we are likely to see some inflation entering the economy, and for that reason we are likely to see the yield curve steepen, and banks will make money the old traditional way, lending long and borrowing short and lending long.

Likes the US financial space in general. Valuations are below long-term averages. Has been beaten up a little with regulatory issues and low interest rates, but those will change. Hopefully, next year, the regulatory issues will be less and interest rates will be higher. The economy should have picked up even more so. He prefers Citigroup (C-N) and J.P. Morgan (JPM-N). (See Top Picks.)

Likes the overall US banking sector. The improvement in the US economy will help lift all of the US banks. Also, feels interest rates are going to rise over time, which will help the banks considerably. Prefers Citigroup (C-N) over this.

Still in the process of shaking off its past. Has a good bead into the retail investment space however a better name would be Wells Fargo (WFC-N). He prefers the Canadian banking sector, especially Toronto Dominion (TD-T).

A consumer focused bank. They had many blunders over the past few years, and he thinks the CEO is trying to get rid of those and move on. Continues to be a consumer focused retail bank. Feels this will work longer-term. Over the longer term this stability should be good for the bank.

(Top Pick July 02/13, Up 21.09%) It has done its thing, but it still trades well on its tangible book value. There are only so many people that can sue them. The US housing recovery is in place.

5.125% bond maturing December 29, 2049. It is very, very likely to be called in five years. They are an improving credit story; capital levels and profit are up. Headline risk has diminished.

Own 10% of all deposits in the US. Great retail branch brand. Has great investment banking in Merrill Lynch, and a great asset management business along with a great brokerage business. US growth, global growth, and a better housing market will help. Not expensive. This could easily trade at 2X Book. Great time to buy at these levels.

His preferences are J.P. Morgan (JPM-N) and Goldman Sachs (GS-N). J.P. Morgan has a better dividend, so this is what he would rather stick with. However, this bank has performed admirably, and he is a big believer that the US banks are dramatically undervalued. As interest rates rise, they’re going to get free money out of nowhere.

It is still early. There is not a lot of catalyst at this point to banks growing. Margins are anemic because interest rate curves are flat. Capital markets are starting to do well. You have to look at credibility of management. A black eye resulted when an error on their tier one capital was found. He would pass on this for these reasons, but also on most of the US banking industry.

She prefers C-N over this. But they are both trading at significant discount to their book value. There will be some pretty good catalysts for stocks in this space.