Wells Fargo (WFC)

It has come under the gun with aggressive practices with cross selling by employees, exactly like TD-T. He would look somewhere else than this one. You have lots of options.

Bank of America (BAC-N) or Wells Fargo (WFC-N)? Both large, US banks, so are going to have more in common than in disparities. It is hard to see one going dramatically in one direction and one going in the other direction. They are both going to be interest rate and economically sensitive. If interest rates move higher, margins are going to improve and will benefit both companies. However, he has a slight preference for Bank of America because of valuation. When looking at BV, Bank of America is dramatically cheaper at about 1.2X. We still haven’t seen the end of the fallout from their scandals in terms of pushing products to people, who weren’t aware they were signing up for a product.

They have a huge reputation going back over 100 years. They got through 2008 in better shape than any of the other banks. Reputational risk could kill a company like this. The scandal has not done this. He would rather stay in this one than jump to another.

14 times earnings and 1.4 times book so it is at the higher end of the range. They will have to improve themselves over the next little while. They will do as well as the others with changing rules. There is not the earnings volatility as with some of the others. You can’t duplicate this franchise anywhere. Tuck-in acquisitions would allow them to grow. They benefit from a steepening yield curve and regulatory changes.

(Top Pick Jan 21/16, Up 23.09%) He sold in November based on difficulties they were having internally. This just did not feel good. He traded it out for BAC-N on November 1.

This stock has lagged its peers. It is lower than where it started the year. It lost the premium that it always had to its peers. (Analysts’ Target: $55.90).

He has been favouring regional banks over big US banks. This one has been underperforming most of the others because of the controversy over its selling practices. There is a lot of negative headlines, which will probably blow over in the long run, but for now there are better ones in the US and Canada.

Of the major money-centred banks, he would probably rank this at the bottom of the big 4. They’re going to have more consumer issues over the next year or 2. They’ve had a premium valuation which is going to erode a little.

He owned it until October and moved to BAC-N. It was the well publicized issues they had. Move to BAC-N or C-N.

He likes it here. The chart looks similar to a lot of other American banks. It was one of the best run banks in the States until recently. He thinks it will return to its previous status.

US financials have been a big holding for him. The risk return is not as good as it was just a few weeks ago. He has begun reducing his holding.

(Market Call Minute.) J.P. Morgan (JPM-N) or Wells Fargo (WFC-N)? He likes both, but in the near term, Wells Fargo has some issues, so he would go with J.P. Morgan.

He likes the US banks. This one, in particular, has lagged the group because of some of the problems they had earlier this year. Trading at a pretty reasonable valuation multiple. As interest rates move up, the net interest margins are going to expand significantly. Doesn’t think people appreciate how much earnings upside these banks have if net interest margins normalize. Over the next few years, there could be 50%+ upside on earnings per share. It is only trading at 12.5-13 times earnings. Dividend yield of 2.8%. (Analysts’ price target is $53.10.)

This had been a traditional blue-chip name in banking. It has the largest mortgage book in the US. Rising interest rates are good for banks. The problem was when they got hit with opening false accounts. Trading at about 11-12 times earnings, and historically has traded at 16 times. This is a multiple expansion play just to get back to normal. Also, Trump wants to reduce banking regulations. Dividend yield of 2.88%. (Analysts’ price target is $52.81.)

His least favourite of the larger US banks. It has been for some time, not because of the headline risk and how they deceived shareholders by fabricating accounts. It has been because the valuation has been so much higher, and has traded at such a premium to BV compared to others. Thinks there is better value elsewhere.