Citigroup Inc. (C)

Has done extremely well. They benefited from a number of different things, including rising rates in the states, but they are also well exposed heavily; more so that the other banks, to international markets, approximately 45% of their earnings. That’s good and bad. Last year in 2017 it actually outperformed at lot of the other banks. Seasonal periods for banks last until April. It’s performing well. From a fundamental perspective, though, US dollars tends to pick up in January. If we see stronger US dollars in January and February, you might see this bank underperform against the other banks because of its emerging markets exposure. Citigroup is fine. Just watch it and the US dollar as well.

WFC-N has been in the news recently with sales practices. C-N is still in line with JPM-N, which is the best in breed. C-N is more emerging markets. You eventually have to choose.

Trading at less than 1X BV, so it’s one of the cheaper US financials. Tax reform and rising interest rates, are going to help banks. Dividend yield of 1.7% is going to go higher. 40% of revenues come from outside of developed markets, and 40% is coming from emerging markets.

There is still fear coming out of the 08-09 financial crisis. Every quarter the company keeps building on their BV and improving their ROE. They are beyond the point where they are worried about troubled assets. Just had an investors day, which they hadn't hosted in a number of years. It was coming out to the market saying they had really turned the corner. Have set a very achievable target of $9 per share in earnings by 2020, well above today’s $5.25. Thinks the stock continues to grind higher as they move towards their plan.

Banks are levered by about 10 to 1. In the heydays of 2007, they were levered over 30 to 1, which is why many of them collapsed. A 10 to 1 leverage is a lot of leverage. They are good as long as the depositors don’t pull out the deposits. This bank is not back to where it was. They did a huge reverse split. He would suggest risk-adverse clients stay away from banks.

He would lump this in with Bank of America (BAC-N). The difference between the 2 is that this one has a more global presence. The balance sheet is really strong right now. They are returning cash to shareholders, and everything is moving in the right direction.

Had a nice pullback to EBV -2. Dividend yield of 1.8% which had been increased in the June quarter by 100%. Thought they would increase it again, but are probably waiting for year-end. Relative to their earnings, it is only paying out 23%. We are coming out of the financial repression and getting higher interest rates. (Analysts’ price target is $78.75.)

Given that we are going to have tighter monetary policies and a potential tax return and a lighter regulatory environment, a name like this will benefit. You can expect a very substantial shareholder capital return going forward. In June they announced a plan to repurchase $15.6 billion of shares back. Have doubled their dividend from $.16 to $.32 on a quarterly basis. This is very global which differentiates them from the other banks. Over 40% of revenues come from emerging markets. Trading at 4.97X Price to Book, which is a big discount to other names. Dividend yield of 1.7% will probably continue to move higher. (Analysts’ price target is $75.)

He would prefer Wells Fargo (WFC-N) or J.P. Morgan (JPM-N). Wells Fargo is more of a retail focused bank and has been under pressure because of some of the news items on opening of accounts. J.P. Morgan is more of a conglomerate bank of investment and retail. It is less focused on international markets, which he views as a positive.

(A Top Pick Oct 18/16. Up 47%.) With the Fed moving, and the banks repairing their balance sheets, he knew things were going to get better.

It is one of the most global banks we have. It is not his favourite bank to own. On a valuation basis there is probably upside, but these banks could easily get cut in half if we ever get a correction.

Which US bank do you like the best? This is the one she owns, so is the one she picks. The huge story on the banks is the capital return. They’ve been making a lot of money, but haven’t been able to pay it out. Capital ratios have been improving, and now they’ve been given the green light to give it back. This bank had an analysts’ day, the first one in 9 years, meaning they probably had something to say. They have pretty aggressive plans. Got rid of a lot of assets that don’t make sense, and focused on what they feel they can be really good at. Set some pretty good targets for their EPS number going out to 2019-2020. Some of that is improvements within the business. They are one of the most overcapitalized banks with the most to give back to shareholders.

He is positive on the "too big to fail banks". They’ve repealed Dodd Franks. There has already been an expansion in their balance sheet in the last quarter. Dividend yield of 1.9%, which is expected to climb. (Analysts price target is $73.)

(A Top Pick Aug 11/16. Up 45.6%.) He likes the US financials. Also the Fed has indicated that they want to keep on boosting interest rates up.

All of the US financials stand to benefit from a rising rate environment as well as a relaxed regulatory environment. This is the one he would think is more accelerated to these new environments. You should have US banks in your portfolio.