Wells Fargo (WFC)

(Market Call Minute.) She would buy it here for the recovery in the US.

This has done okay, but net interest margin compression has probably hurt this more so than its peer group. It has a higher level of deposits investment securities, so it will get hit by the fact that interest rates are very low and not moving very much. When interest rates start moving back up, this can do quite well. From a valuation perspective, there are probably other banks that look more interesting. (See Top Picks.)

Financials in the US is one sector that is trading below market multiple. This is a retail bank and he considers it is one of the best in breed in the US. Had a recent dividend increase and a commitment to buy back shares. Anywhere around here would be a fair price.

This is a senior bank that is well capitalized and well-managed. Haven’t had the regulatory difficulties that some of the others have had. More tied to the housing market than any other institution. Over time mortgages will be a winning strategy for them.

(Top Pick Mar 5/14, Up 20.52%) Still one of the best managed banks in the US. The highest ROE. They were approved for a 7% dividend increase. She thinks the US economy is recovering and if rates move up this should be positive for their margins.

In his income portfolios, about 18% is focused on financials. He is focused more on asset managers, exchanges and financial services technology companies, but he does have a smaller bank weight, which is focused in the US and not in Canada. Of the big banks, he thinks this is about as attractive as any of them, because they have such a strong exposure to the housing industry. Given the stronger consumer, he thinks there is likely a pickup coming in the housing market. You are likely to see dividend growth in the stock going forward.

This is a wonderful company. They have the highest return on assets of any US bank. If you own, continue to hold it.

Range bound bank, trading in the last 3-4 months, has been terrific. This has been the best performing in the range. Canadian banks have been poor, and the other US banks have not held in nearly as well as this one. Probably the most disciplined, best run US financial institution that exists today. Now the largest lending institution in the US. Trading at a little bit of a premium. Has reduced his weighting and added Bank of America (BAC-N) and Citigroup (C-N). Believes there is more to go for the US banks. (See Top Picks.)

(A Top Pick Feb 4/14. Up 25.59%.) In US banks, this is the best of breed. Had bought this when she thought the US economy was recovering. She would buy at this level for new clients.

If he were to buy a US bank, this would be the one he would most likely buy. Very well-run. Has a lot of exposure to the housing market and he thinks the housing market will continue to recover. Has a good yield.

All US banks are reporting what is characterized as disappointing earnings. This is just a continuation of what we have seen for the last few years, i.e. very large reserves being built for litigation costs, and the fact that their loan growth is kind of anaemic and they are not making a lot of money on deposits. That is the past, and at some point things will change. The catalyst for this is going to be the federal reserve. When they start to raise rates, he thinks that the market will start to take over the yield curve and will steepen it. Feels that litigation issues on the banks will start to slow down and the banks will start to make money in a more natural way.

High-quality bank with a proven track record of growing its profits and raising its dividend. Focused on credit quality. On price performance over 5-10-20 years this is in 1^st or 2^nd place. Feels they are going to benefit from an improving US economy and eventual rising interest rates. The leading residential mortgage player out there as well as a top auto, small business and midmarket lender, so as the economy improves, loan growth will start to improve. Yield of 2.7% and feels that they will get approval to keep on increasing this. Trading at an attractive multiple of about 12 times forward earnings.

This is probably one of the better financials, but he is still a little concerned about falling energy prices. Some of the major names in the US are really falling out of bed, and some are still trading above the 200 day moving average, but there are a handful that have violated the 50 day moving average which is an early warning. The long-term trend on this is still up. It broke the 50 day moving average yesterday pretty aggressively.

Wells Fargo (WFC-N) or J.P. Morgan (JPM-N)? A lot of the small mid-cap oil companies have heavy exposure, from a banking point of view, along refined (?) equity issues. Not sure of the concentration for the oil exposure, but given the run-up we have had globally, he would think that everything from the A&P companies to the pipelines, etc. will have impacts. Historically this has been considered to have the best risk management culture. This showed up during the banking blow-up, as they didn’t have to take the money. J.P. Morgan was considered to be #2. Both banks are quite good. This one is more of a consumer driven story where J.P. Morgan is a banking driven story. He would rather chase the regional trade, because there is still a lot of regulatory glare been exposed to the money centred banks. Of the 2, he would favour this bank.

3% dividend, likely to have accelerated dividend growth going forward, strong balance sheet, and very little commercial risk. US financials are likely to have a tailwind going forward.