JP Morgan Chase & Co (JPM)

This group benefits from rising interest rates, and this is the strong man in the group. 75% of their revenues comes out of the US, so it is really focused on the domestic economy. They have a good commercial banking business, a good private banking business, and a great capital markets business. Have grown their dividend 18% a year over the last 5 years. They are taking market share from their competitors. Exceedingly well run by Jamie Diamond and his group. They don’t pay a high percentage of their earnings out. ROE is north of 10%. Price, relative to the group, has been steadily improving. Dividend yield of 2.86%.

He would characterize this as being the senior representative of the US banking sector. It is the healthiest and has the best reputation. If you want to have a position in the US financials, this is certainly a good choice. On the other hand, if you are looking for some valuation recovery, he would look at Citigroup (C-N), Bank of America (BAC-N) or Wells Fargo (WFC-N).

(Market Call Minute.) If this is one of the banks that you feel you want to own, he wouldn’t have any argument with that.

(A Top Pick June 10/15. Down 2.03%.) There is a nice little uptrend going on. We are really not going to know the answer until it gets above the $60 mark. This will be very sensitive by what is discussed by the Fed in June.

(A Top Pick July 16/15. Down 3.76%.) Still likes this and still thinks the US economy is recovering. It will be fine.

(A Top Pick April 15/15. Down 2.67%.) Had felt that we would be a few steps into some interest rate hikes. He is happy to own this. It is a great franchise.

As it is becoming clearer that equity markets are more sustainable, he is interested in having a little bit more capital market exposure. Because of this, he recently sold Wells Fargo (WFC-N) and added this.

(Market Call Minute) The only American bank that is working. Model price is 61.79, flat.

US banking has fallen by 30% this year, and he thinks that is inappropriate. Trading at 1X BV. Historically this is incredibly cheap. Dividend yield of 3%.

Financials in the US are very out of favour. 3.5% dividend and it trades below book value. Hold it for the long term.

Jaime Diamond has done a spectacular job of negotiating and navigating the company through a lot of litigation. They over-reserved for it, so they are drawing down. Thinks the driver is the rising rates in the US, which will give them a lot more room for margin and global reach. They are one of the survivors of the financial chaos and came out stronger than when they went in. Dividend yield of 3.01%.

Likes the idea of owning American banks, because they are going to become prime beneficiaries of interest rates going up. They don’t have the earnings headwinds Canadian banks have, and they don’t have the credit risks that he believes Canadian banks have. This is not one of the banks that he likes because it has a big capital markets area, and he is not interested in that area. Prefers BB&T Corp (BBT-N), a consumer bank, (See Past Picks) and a commercial bank BankUnited (BKU-N) out of Florida.

If you are in the camp that interest rates will start moving higher, then you want to own some of the major financials in the US, including banks. He still likes this one. It is trading nicely and has moved up okay over the last year. Also, trading nicely from a technical perspective.

They are the leader in US banking. If you buy one, you want to own this one, if not WFC-N. It is not as cheap as Canadian banks, but the one to buy if you want to buy the US banking sector. He bought it because the interest rate is more likely than not and JPM-N will benefit from it.

There is nothing wrong with this bank. It is more senior and well-managed. He likes it, but is just not sure that there is not more to gain by being in a different area of the market. Relatively fully priced. It will participate in the banks rising, but on a relative basis it will not be an outperformer compared to the other banks.