Standard Chartered Bank (STAN-LSE)

Prefers HSBC (HSBC-N) over this bank. This has a little more exposure to emerging markets. If you want a more diversified kind of bank, HSBC would be the one. Not particularly enthusiastic about this bank’s prospects, relative to some of the other major banks.

This bank has gone through all kinds of turmoil in the last few years. The board and CO have totally changed. They have to re-trench a whole host of markets. Probably looking to raise common equity. This is very much a turnaround story and it is too early to say whether or not it is going to succeed.

Had a miserable 2013 as the valuation and profitability on its sizable emerging markets businesses has come down and down and down. It is at a size where it could absolutely be digestible for one of the large banks. This could potentially happen next year or the year after, once there is greater regulatory clarity on capital requirements. (See Top Picks.)

International banks. Which ones would you be looking at other than the US? How many would you hold at any one given time? Has a big problem with a lot of European banks right now because they are still under capitalized relative to where Basil 3 is going to be. They are either going to have to issue debt or do a rights offering, which is highly dilutive to the shares outstanding. This is the one that he likes and is an Asian/Middle East/African and doesn’t have a lot of North American content. Got hurt in the last quarter with a big write-down in their Korean operations because of an acquisition they made a few years ago but are still on track to roughly grow their business in the 8%-10% range. Dividend usually rises at that rate as well. 4% dividend yield.

Has a big Asian exposure. Biggest foreign bank in India. Had the issue with the “supposed” money-laundering of Iranian trade. It turned out only $23 million of the supposedly $100 billion was not appropriate but still had to pay a $400 million fine. Great, great play on the emerging-market middle class.

(London Stock Exchange) Very, very large, basically Asian bank. Has exposure in Asia, Africa and other parts of the emerging world. Good time to have picked this up would have been last summer when they got in a lot of trouble with US regulators. Trades at around 11X this year’s earnings and 10X next year’s earnings. Dividend yield of about 3.5%. Thinks earnings and dividends will grow at about 10% or so in the next couple of years.