Wells Fargo (WFC)

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.

He avoids the regulatory glare. He goes for regional banks. However, he would buy this one here.

He does not own any of the banks in Canada or the US. A lot of the banks delivered significantly. WFC-N survived. It is probably one of the best managed banks over time. They compounded their book value per share 11%. Returns will be lower because leverage has come down. They are buying back stock and increasing the dividend, but he shies away from the banks. He likes that they are retail funded rather than wholesale. You may want to add to the position on a pullback.

J.P. Morgan (JPM-N) or Wells Fargo (WFC-N)? She would favour this one because it is the one that she owns. J.P. Morgan is more capital market sensitive, so if you are really bullish on markets and financing, perhaps you could get more upside with it. To her this is a cleaner story and went through the 2008-2009 financial crises relatively unscathed. They are well-positioned for a recovery in the US housing and commercial credit. When she looks at banks, she looks at their sustainable ROE’s and ROAs and this one is the less volatile of the 2.

Well run bank that did not get into any trouble.

J.P. Morgan (JPM-N) or Wells Fargo (WFC-N)? Two very good, but different companies. J.P. Morgan is much more leveraged to the capital market side of things whereas this one is primarily a super-regional bank, much more housing market and mortgage driven. His preference is this one because of his view on the US housing market where recovery is only about halfway through. Both could be a good choice. (See Top Picks)

A lot of people think this is the smartest bank in the US, and this is why the stock has done so well. It may have done too well as the stock has had a tremendous move this year. Feels it is fully priced.

Very well-run bank. Tend to focus on the consumer. There is a great deal of stability in the US.

Perpetual preferred bond, issued by a high quality bank, one of the best banks in the world. Perpetual means you have to look at duration risk. It never has to be called. If rates rose significantly, this one would suffer. If it is one of the few long duration things he own, then it is fine.

An attractive company. He is very positive on the US economy. Bank lending is improving and increasing. This one has one of the highest returns on Assets of any of the banks, probably of the world. Cream of the crop. Prefers J.P. Morgan (JPM-N).

(A Top Pick June 4/13. Up 31.47%.) Feels this is the best managed bank in the US. Getting a great return on capital compared to their peers. Dividend of 2.7%.

Probably at the high end of its range on a valuation basis. Incredibly well run bank. A great US franchise. Primarily a retail U.S. Bank with a large mortgage book, which continues to do well and grows. Increased their franchise quite substantially with the purchase of Wachovia. (See Top Picks.)