JP Morgan Chase & Co (JPM)

We are close to the May intraday high in the S&P. This one has a test of that high. If we do break through he doesn’t see a lot of upside before the next correction. Don’t chase it. It will be a chopping market this summer.

Really knocked numbers out of the park. The interesting thing is that the stock actually closed negative. This is telling you that a big part of this bank is investment banking and trading. Going forward, with what is happening with interest rates, the potential for debt origination and proprietary trading capital markets business are going to be lower. Thinks there is a lot of underlying risk. The shine of the Steady Eddie earnings grower over a longer period of time, is going away from the banker. There are a lot of questions on the raising of capital ratios and how they calculate those ratios. This is a bank that needs to feed off capital markets and he sees it kind of range bound in this area from here. He prefers Wells Fargo (WFC-N).

US banks versus Canadian banks? If you have a group of companies that are fundamentally sound but are seeing net improvements from the margin like the US banks are seeing, and you compare them to a group likes the Canadian banks, relatively more expensive but the margins are seeing slowdowns, Canadian banks are likely to see contraction in the multiples and he feels you can get expansion in the multiples in US banks. This one was able to dance through the damage without getting winged too badly so their management group should have pretty strong credibility and probably should have a multiple that is higher than the group. Yield is about 3% and there hasn’t been a lot of dividend increases because the Fed has held all of them back.

Likes the US banks a lot and this is a big granddaddy of them all. Their core business is very solid. Investment banking is rebounding. Net interest margins are beginning to rise. Housing market is doing well. Only trading at 9X PE, which is a huge discount to its historical norm.

You have to own a US bank in your portfolio. Valuation is quite attractive. This is one sector that will benefit from rising interest rates. Meanwhile, it is benefiting from the US housing recovery. Still cheap. Thinks it could trade well into the $60-$70 range over the next year or so, on an improving outlook on the US economy.

Probably the most senior of US banks. Pretty healthy, but like all of them, it is in a position where they are making their money through cost cutting. That is not a great reason to own a company. The opportunity with the banks is if the net interest margins start to expand. Banks are starting to hit his screens.

One of the best run banks in the US. One of the strongest CEOs in the world. Low valuation multiple, 3.5% dividend. Mid-double digit ROE (15%). Has the wind at its back. Improved credit metrics, better capital markets, improved mortgage markets. There are a lot of reasons to like this company.

Have finished acquiring the joint venture of City, which should close pretty soon and will be tied with Merrill Lynch for the largest wealth management brokerage business. They could triple their profits. They are going to add $57 billion in deposits over the next 3 years because of that. As interest rates rise, the spread rises and you could add $800 million in profits. That would be 15%-20% of their current profit, just from the deposit base alone.

Up 65% over the last year. We are now at a stage where you might want to think of taking some profits on US banks and looking at Canadian banks, especially with the set of results we have had. 2.5% yield.

This is the best of breed, large cap financial institution in the world today. Solid, diversified stream of earnings.

Is the bank he likes to own.

Has one of the best bank CEO’s in the US. Pays a nice dividend. Benefit, like other US financials from a recovering mortgage market and a generally stronger economy. Trades at a pretty reasonable valuation multiple.

You can buy this today at around 8.8X this year’s earnings. On a price to book basis it’s below 0.9 times still. Very attractive multiples. Below book because it’s ROE is only about 10%. In this industry, you are likely see ROE’s increase over the next few years, which will mean increases in price to book. Dividend yield of 3.14%. Great way to play a recovery in the US market and you get interest-rate sensitivity as well.

Likes this, but they have been in a mess with the whale (?) trade and there are other things going on. Wouldn’t buy it here but would wait for a pullback.

Buying back shares and raising their dividends per quarter is positive. Banks have had a huge run so far. With the housing recovery and the general economic recovery, US banks will do well.