Citigroup Inc. (C)

(A Top Pick June 15/16. Up 54%.) He knew that sooner or later the Fed was going to do an about-face and start to tighten, which would help the banks.

Bank of America (BAC-N) or Citigroup (C-N)? The primary difference is that this is international and emerging-market focused. There are definite tailwinds to both of these.

This US bank has more international exposure, which is attractive with some of the international economies which are rebounding and growing more quickly than emerging markets. Also, trades at a valuation discount to it peer group. Trading at a discount to tangible book right now, at only about 11X earnings. Dividend yield of 1%, and there is a big opportunity for this to go up. (Analysts’ price target is $66.)

In the last 3 months, we have seen one by one, markets around the world lift off and start making new highs. This bank gets over 50% of its revenue from outside the US. They have $1.4 trillion in loans outstanding. Have a great credit card business. There is likely to be significant dividend and share buybacks announced in June of this year, because they now have enough capital to return 100% of their earnings back to shareholders. Dividend yield of 1.05%. (Analyst’s price target is $65.)

His favourite financial to own. The one bank that is still trading at a discount to its tangible BV. When trading at a discount to Book Value, the market expects your BV to erode, but since 2011, every single quarter, their BV has increased.

Bank of America (BAC-N) or Citigroup (C-N)? This gives you a little more international exposure and more investment banking. It comes down to where your comfort level is going to be. He would personally prefer J.P. Morgan (JPM-N), given that their investment banking arm is probably doing better than Goldman Sachs (GS-N) right now. The stock is fairly cheap on a relative basis.

US banks are performing well because the government wants to cut corporate tax rates, but also, very significantly for the banks, is that they want to roll back a lot of Dodd Frank and reduce regulations. That would allow banks to lever up again, and boost earnings. After the massive run ups most of the US banks have had, there is not going to be the same run for the next 12 months. However, they are in excellent shape and well capitalized as an industry to move forward.

They will benefit once interest rates start to go up. Historically they have not been a well run bank and continue not to be. There are better choices. Also, he prefers regional banks.

Sees further upside in the US banks in general. This one is in the middle of a valuation, and he thinks they are recovering nicely and will share the benefits of a growing US economy, and likely higher US interest rates. This will be a long-term hold.

A play on an improving US economy. This is in much better shape than it was a few years ago. They are still far inferior than Wells Fargo, a single digit which is an important metric. However, they’ve been given permission to increase their dividends.

Diversified financial that has taken a bit of hit recently. You are looking for expanding short interest margin. There have been very significant deposit inflows. There are a net inflow of demand deposits recently. They have no cost to the bank. You want to see some tax and regulatory reform.

Over the medium term, the shares can and should benefit from rising interest rates, a lighter regulatory environment, as well as a general recovering economy. There is potential for a large capital return back to shareholders. In November, they announced $1.7 billion share buyback instead of dividends. It is very diversified globally speaking, and will benefit from emerging markets like Latin America as well as Asia. Trading at a very cheap valuation in the group. Dividend yield of 1.07%. (Analysts price target is $65.)

The sell-off is an opportunity to buy. He is bullish on the US banks.

All the banks have had a great run since the Trump election, partly premised on deregulation. Dodd-Franks has been a burden, so deregulation will be good for them. If the regulatory burden gets less, they would then have a lot of excess capital, which could potentially be returned to shareholder by dividends and buybacks. Compared to Canadian banks, this is still very cheap, especially on Book Value. This one is very exposed to international markets, and Mexico comes to mind. On balance, it is probably a good one to get into, preferably after a pullback after its very strong run.

(A Top Pick Feb 17/16. Up 55%.) The economy has been improving and that has been to the benefit of the banks.