Bank of America (BAC)

One of the most sensitive to a steepening in the US rate curve. On top of that it has a large capital markets business. He wouldn’t be surprised to see $18-$24 in 12 months.

(Top Pick Jun 2/14, Up 3.93%) They are getting through some of the problems they went through during the financial crisis. One of the better of the major banks in the US. Loan growth has been slow, but their acquisition of Merrill Lynch has worked out well and what they have done on the housing side.

(A Top Pick March 20/14. Down 11.58%.) This has been disappointing. It was cheap then and it is cheap now. The thesis is still alive, which is a play on US housing, the eventual loan growth, steadily improving capital levels, etc.

The next stress test is in September. Buy now or wait and see? It depends on what other bank exposure you have in your portfolio. He likes the US banks, primarily the regional banks. What is nice about this bank is that it does generate a large part of its revenues from retail banking. If you have some patience, this is a name that you want to own in your portfolio, but if you want to take it one step further, he would look at some of the regional banks.

Likes this stock. Net interest margins are very low in the US and are under pressure. Although they cut costs, they didn’t see a lot of growth on the investment banking side. They are in 10% of all the households of the US, so they are a very large retail bank that needs net interest income to improve. They also are faced with a lot of regulatory issues. They have to do another stress test in September and he is upset that management has not been keeping an eye on these things. Thinks you should own this for the longer-term.

Prefers US banks over Canadian ones. There has been a big hold back for the really big US banks, where the feds are taking a really close look at their ability to withstand another 2008-2009 type scenario. He doesn’t own any banks and prefers specialty financing companies instead. (See Top Picks.)

Prefers US banks over Canadian banks. This bank is probably one of the lower attractive names, but you will do fine with it.

To him this is a Wells Fargo (WFC-N) in waiting. There was some really poor management during the financial crisis that has resulted in a lot of baggage. The CEO has a real mandate to getting it back to being a retail bank. If it does succeed, it will have a real retail footprint. However you are going to have a lot of baggage to get there. There are better quality banks in the meantime.

(Top Pick Mar 3/14, Down 2.27%) The catalyst is the overhang over banks including nay-saying, litigation and so on. This is the cheapest group on the market. Warren Buffet sees this as a long term opportunity. The overhang is in the rear view mirror.

He prefers US banks to Canadian banks. He stayed away from money center bank because they have big operations in capital markets. Regional banks give you a bigger leverage to consumers.

The real winners from the recent stress tests, were regional banks, who were allowed to increase their payout ratios from 30% to 35%. This bank was not allowed that freedom, but they were given the ability to buy back shares. This has some good catalysts ahead of it as it is tied to the US housing market.

If interest rates start to go back up, some of the pressure on bank margins would disappear. US banks are very cheap. BAC-N is at its book value. This is a real bargain giveaway. He has had a warm feeling for it since the recovery. The banks have not been able to get going yet and he does not know if they will, but maybe rates going up would be the catalyst required.

Bank of America (BAC-N) or Banco Santander (SAN-N)? Banco Santander has a much lower dividend yield. This bank is a play on the health of the domestic US economy. If you are comfortable with that, this is probably the one to stay with.

(A Top Pick March 26/14. Down 5.57%.) This bank has lots of capital, but the issue is, can they maintain it. The Fed was unhappy with what would happen to their revenue and their capital structure, if something happened to the economy. Thinks they were smart to buy back their shares instead of increasing the dividend. He still likes it.

Banks have been struggling. They’re always being sued by the government for one thing or another. Just don’t seem to be able to keep out of trouble. They continue to be trading vehicles. You buy this around $15 and then sell it at around $17.