Money Center Banks Manage to Generate Capital Through Earnings Despite Difficult Interest Rate Environment: An Expert Banking Equity Analyst Shares His Top Picks with The Wall Street Transcript

Wall Street Transcript

67 WALL STREET, New York - April 29, 2013 - The Wall Street Transcript has just published its Money Center Banks Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Investing in Regional Banks - Increase In Investor Risk Tolerance - Regulatory Obstacles and Fee Income Replacement - Fiscal Cliff Effects on Banking - Interest Rates and Loan-Growth Strategies - Regulatory Outlook Gains Clarity

Companies include: JPMorgan Chase & Co. (JPM), Wells Fargo & Company (WFC), US Bancorp (USB), PNC Financial Services Group I (PNC), Capital One Financial Corp. (COF), American Express Company (AXP), Discover Financial Services (DFS), Visa, Inc. (V), Mastercard Incorporated (MA), Citigroup, Inc. (C), Bank of America Corporation (BAC) and many more.

In the following excerpt from the Money Center Banks Report, an expert analyst discusses the outlook for the sector for investors:

TWST: What are your top investment picks right now and why?

Mr. Orenbuch: The two that are our top would be Citigroup (C) and JPMorgan (JPM); Citi for the very simple reason that we think it sells at not just a discount to book value, but a discount to what it would be worth if you looked at the banks that comprise Citi in the various countries in which Citi operates. Mexico is one of the largest countries for Citigroup, and Mexican banks trade at probably 2.5 times earnings. Brazil is a fairly large component as well; non-Japan Asia in the aggregate is a reasonable driver. And yet Citi as a company still trades at 90% of tangible book. Profitability has been under pressure, and they have a large deferred tax asset, but we believe both of these factors will improve in 2013 and 2014.

The second pick would be JPMorgan, which has been consistently earning 15% on tangible equity, trades at 1.25 times tangible book, does have an almost 2.5% dividend yield and is buying back stock. I think it has maybe a little less capital return than was approved for in 2012, although we would expect that they will actually do more of it than they did last year, when they had to stop it because of trading issues that they had come to light in April and May. So those would be our top two ideas on the large-cap banks.

TWST: Are there any names you are particularly cautious about?

Mr. Orenbuch: None of the large-cap banks are overly expensive, I would say, and so we are not actually particularly cautious about them. I think that Wells Fargo (WFC) - unfortunately, there is a certain element of...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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