Wells Fargo (WFC)

He likes US banking as a general rule and this is a great company. They beat the street a little. The bigger issue is that they were targeting between 52% and 58% efficiency ratio, and came in with 62% because of the legal issues they had to face. Trading at 1.4X Book with a 3% dividend yield and it has lots of capital. a credible franchise all through the US, and thinks they can grab market share over the next little while. Their client servicing problems will still get passed out over the next several quarters, and then you will be able to see the company really start to grow again. This is a company that is going to grow more organically than through acquisitions. He really likes the company. (See Top Picks.)

This is a long-term Buy. It is a 1^st rate bank. They are not the 1^st bank that has gotten into some difficulty. The time to buy good banks is when they stumble.

Just reported and beat estimates. A great company and well run. Trading at 1.6X Book with a small dividend yield of 2.7%. Trading at 13X earnings. Net interest income, the biggest thing in this company because it is primarily a retail bank, is about 2.87%, a couple of basis points lower than expected. However, expenses went up. Costs are impacting them because of the issues they face with their employees, sales tactics, etc. That will affect them over the next couple of quarters, and earnings will be slightly depressed. As a franchise, this company is pretty incredible. If you get a nice pullback, he would buy it.

(A Top Pick March 10/16. Up 13%.) This pulled back quite a bit when the scandal 1^st came out. Prior to that event, it was always regarded is a very well-run bank, and got a premium valuation in the group. Pays a very nice dividend yield versus some of its peers. Higher interest rates will be beneficial to all banks. Still trading at a reasonable multiple of about 13X forward earnings with a yield of just under 3%.

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.