It seems hard to believe, but since the highs that were posted last summer, the bank stocks as a whole are down a stunning 20%, which is more than two times the loss that the S&P 500 put in. The question for investors looking at the group is whether this is a bottom or they have farther to fall. With worries about a slowing economy, harsh election year political rhetoric and weakening capital markets, some are still steering clear.
A new Deutsche Bank research report touches on all the above-mentioned concerns and numerous others, not the least of which is the fallout from bad energy loans, which could be around for years. However, the firm does have bank stocks in its research universe that are rated Buy. We found four that look very attractive now.
Bank of America
This company has continued a methodical march back to financial health and is a true big money center bank to make the list at Deutsche Bank. Bank of America Corp. (NYSE: BAC) is the fifth largest bank in the world by market capitalization, and it is a ubiquitous presence in the United States. The Merrill Lynch brokerage arm has continued to supply the bank with outstanding revenues and growth.
The company provides various banking and financial products and services for individual consumers, small and middle market businesses, institutional investors, corporations and governments in the United States and internationally. Operating 5,100 banking centers, 16,300 ATMs, call centers, online and mobile banking platforms, the company continues to open new markets and expand share, which Jefferies feels it excels in.
CEO Brian Moynihan has met numerous times over the past year with Wall Street and many analysts came away feeling good about the overall outlook for the bank. With the potential for strong commercial lending and credit card originations, and trading at 9.4 times 2016 estimated earnings, the stock makes good sense now. Deutsche Bank cites the bank’s good expense management, loan growth and the valuation as positives.
Bank of America investors receive a 1.48% dividend. The Deutsche Bank price target for the stock is $17, and the Thomson/First Call consensus target is $17.45 The stock closed on Friday at $13.54.
This stock trades at a very low 10.5 times estimated 2016 estimated earnings. JPMorgan Chase & Co. (NYSE: JPM) is also expected to benefit from commercial loan growth and an upturn in capital spending. Wall Street analysts agree that the stock seems attractively valued on estimated price-to-earnings (P/E) and a very solid price-to-book value. Some on Wall Street have cautioned that last year’s divestiture of the physical commodities business could provide an earnings headwind throughout this year.
Improvement in loan growth, terrific equity capital markets and a steady increase in deposits are a solid plus. Trading at a discount to many of the large cap banks on 2015 earnings estimates helps upside potential as well. With $2.6 trillion in assets on a worldwide basis, and one of Wall Street’s savviest leaders in Jamie Dimon, the stock is a solid buy for investors. Dimon also recently put his money where his mouth was and reportedly bought a stunning 500,000 shares for a massive $26 million. It brings his total holdings in the bank to 6.7 million shares, worth over $360 million.
JPMorgan investors receive a 2.93% dividend. The Deutsche Bank has a $70 price target. The consensus target is $70.07, and shares closed on Friday at $60.05.
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