More Share Buybacks Coming from Wells Fargo and U.S. Bancorp?
We view Wells Fargo (WFC) and U.S. Bancorp (USB) as best positioned to deploy capital and buy back shares in 2012-2013. Despite the losses in the CIO portfolio, we expect JPMorgan Chase (JPM) to request a healthy buyback program and dividend increase ...
Though the environment remains challenging for industry, big banks posted strong mortgage-banking revenues in the second quarter, and the analyst expects this to continue into the third and fourth quarters. Cost control will be a priority and several banks made some good progress on this front in the second quarter, particularly Bank of America (NYSE: BAC). Credit Suisse believes the ability to control costs will be a key differentiator in profitability in 2012.
J.P. Morgan Chase
The share price of J.P. Morgan Chase (NYSE: JPM) is about four percent lower than six months ago, largely due to a sell-off in May following the announcement of a $2 billion trading loss. But shares have popped almost six percent in the past week. This New York-based multinational banking corporation has a market cap of about $149 billion. The price-to-earnings (P/E) ratio is lower than the industry average, and the dividend yield is around three percent. The long-term earnings per share (EPS) growth forecast is a little over seven percent, and the return on equity is greater than those of peers such as Bank of America and Citigroup (NYSE: C). Analysts seem to think the stock has some room to run, as their consensus price target is more than 12 percent higher than the current share price. But over the past six months, the stock has underperformed Bank of America and the broader markets.
U.S. Bancorp (NYSE: USB) reached a new multiyear high on Friday, though it has been trading mostly between $32 and $34 a share since the beginning of July. The Minneapolis-based diversified financial services holding company has a market cap of more than $64 billion. Its P/E ratio is about 12.4 and the operating margin is greater than the industry average. The long-term EPS growth forecast is about 7.8 percent and the return on equity is more than 16 percent. The dividend yield is about 2.3 percent. But just 14 out of 34 analysts polled by Thomson/First Call recommend buying the stock. The consensus price target is more than four percent higher than the current share price. The stock has outperformed Bank of America, J.P. Morgan and Wells Fargo, as well as the broader markets, over the past six months.
The share price broke above $35 last week, a level it has not seen since late 2008. The stock is up more than 22 percent year to date. Wells Fargo (NYSE: WFC) is the fourth largest bank in the U.S. by assets and it is headquartered in San Francisco. Its dividend yield is about 2.5 percent and the long-term EPS growth forecast is about nine percent. The operating margin is greater than the industry average. Short interest is less than one percent of the float. Of 34 analysts polled, 26 rate the stock at Buy or Strong Buy. Their consensus price target on Wells Fargo is about nine percent higher than the current share price. Over the past six months, the stock has outperformed Citigroup and J.P. Morgan Chase, as well as the broader markets.
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