XLF

J.P. Morgan’s Net Interest Margins to Come Under Pressure

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Image Source: Trending Topics 2019 By Matthew Warren JPMorgan (JPM) reported second-quarter results July 16, with revenue up 4% to 29.6 billion and net income of $2.82 per share ($2.59 excluding a one-time income tax benefit of 23 cents) compared to Wall Street estimates of $2.49 per share. Average total loans were up 2% year over year while deposits grew a healthy 4% on the same basis. Even after distributing $7.5 billion to shareholders in the quarter via dividends and share buybacks, the bank remains extremely well capitalized with a common equity Tier 1 ratio of 12.2%. Despite this robust level of capital, the bank posted a return on tangible common equity of 20% in the quarter, or 18% after … Read more

Citigroup Still Has A Lot to Prove

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  Image Source: Citigroup Quarterly Presentation  By Matthew Warren On July 15, Citigroup (C) reported Q2’19 revenues up 2% year over year to $18.8 billion and adjusted earnings (excluding a gain on its investment in Tradeweb) of $1.83, or 3 cents better than consensus estimates. Expenses in the quarter were down 2%, yielding the 11th consecutive quarter of positive operating leverage and improving efficiency ratios, which currently stands at 56% in the quarter. This has helped boost return on tangible common equity (RoTCE) to 11.9% in the quarter and the first half of the year, quite close to management’s commitment of 12% for the full year. Management has also stated a goal of reaching 13.5% for the same metric for … Read more

New Highs! The December Call Has Been Well-Rewarded

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Image shown: Valuentum’s Dividend Growth Newsletter portfolio. Since inception, the newsletter portfolio has *never* had a constituent that experienced a dividend cut. We moved to weighting ranges beginning in 2018.   “The less the prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own.” – Warren Buffett (2018) By Brian Nelson, CFA While others are celebrating, we know better. This market could come down upon itself like nothing else. But for now. We breathe a sigh of relief. A company, Valuentum, that emphasizes the importance of timing and then delivers on that cold December 26 day to move to all-in in the newsletter portfolios is something remarkable (see image below). We cannot go back to … Read more

Excerpt: Big Six Banks as a Yield Play?

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An article excerpt from our monthly High Yield Dividend Newsletter. Order the High Yield Dividend Newsletter here. To continue reading… become a member of the High Yield Dividend Newsletter today! —– Banks – Regional and Asset Management: AB, AINV, AMP, ARCC, BCH, BEN, BGCP, BKU, BLK, BMO, BNS, CM, FSIC, ISBC, KKR, LAZ, LM, MAIN, MTB, NABZY, NYB, OCN, PBCT, PFG, PSEC, RY, SBNY, SBSI, STT, TD, VLY, WBK  Banks & Money Centers: AXP, BAC, BBT, BK, C, DFS, FITB, GS, HBC, JPM, KEY, MS, NTRS, PNC, RF, STI, TCF, USB, WFC Related: XLF, KBE, KRE —– Valuentum members have access to our 16-page stock reports, Valuentum Buying Index ratings, Dividend Cushion ratios, fair value estimates and ranges, dividend reports and more. … Read more

Morgan Stanley’s Lumpy Performance Calls Into Question Durability of Earnings Stream

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Image Source: reynermedia If Morgan Stanley’s activities can collapse that quickly, as they did during the fourth-quarter of 2018 when the market swooned, it really calls into question the durability of the earnings stream for all of the global players. By Matthew Warren Morgan Stanley (MS) reported first-quarter 2019 results April 17 with net revenues down 7%, earnings down 9%, and diluted earnings per share down 4%. Return on equity was 13.1% versus 14.9% last year. The firm’s efficiency ratio was 71% versus 69% in last year’s first quarter. The bank is well-capitalized with a common equity Tier 1 ratio of 16.5%, which is necessary considering the riskier nature of Morgan Stanley’s balance sheet compared to a universal bank like … Read more

Taking a Fresh Look at Goldman Sachs

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After taking a fresh look at our valuation assumptions in the context that Goldman hasn’t really proven that it can earn above the cost of capital through the economic cycle, we have lowered our fair value estimate to $200 per share. By Matthew Warren Goldman Sachs (GS) reported first-quarter 2019 results April 15 with revenue down 13%, to $8.8 billion, and diluted earnings per share down 18%, to $5.71. Return on equity was a middling 11.1% and return on tangible common equity was 11.7%. The bank’s standardized common equity Tier 1 ratio is 13.7%, well above large bank peers. This makes sense as Goldman holds substantial investment positions such as private equity holdings on its balance sheet, which have the … Read more

Raising Our Fair Value Estimate for Bank of America

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Image shown: Valuentum’s fair value estimates for its banks and money center coverage. We’ve raised our fair value estimate of Bank of America. The only thing not to like with Bank of America is that banks are cyclical and the economy is overdue for a downturn. Everything else is going right at Bank of America. We have raised our fair value estimate for Bank of America to $35 per share. By Matthew Warren Bank of America (BAC) reported first-quarter 2019 results April 16, with revenue stable at $ 23 billion, pre-tax income up 4% to $8.8 billion, and thanks to 7% fewer shares outstanding, earnings-per-share was up 13% versus last year’s first quarter. It was again the crown jewel consumer … Read more

Big Bank Roundup, Bank of America Catches Our Eye

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In this article, let’s catch up with how far the big 6 banks in the US have come since the height of the financial crisis exactly a decade hence. We will highlight the improvements in the banking system, some of the key risks, and a few high level thoughts about the individual franchises leading the US banking system. We like Bank of America the most, and we include diversified banking exposure in the Best Ideas Newsletter portfolio and Dividend Growth Newsletter portfolio. “Both a European bank crisis and/or a Chinese banking and economic crisis would be mutually reinforcing to the downside and a major cause of global deflation.” – Matthew Warren By Matthew Warren When you take a look at the … Read more

Outperformance No Matter How You Measure It

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Image shown: The performance of Valuentum’s simulated Best Ideas Newsletter since the inaugural edition of the newsletter, July 13, 2011. We migrated to a weighting range format for the Best Ideas Newsletter portfolio ideas beginning in 2018. At that time, Visa (V) was the top weighting by far at 8.6%. Shares of Visa have soared since, and other ideas haven’t been too shabby either! Source. Valuentum’s Best Ideas Newsletter portfolio is in a class by itself. Did you know that ~90% of active fund managers are underperforming their benchmarks over prolonged periods of time? The lack of volatility of the simulated Best Ideas Newsletter portfolio had been driven by its massive average cash “weighting” of 25% during its history, something we … Read more

It Definitely Is a *Best* Ideas Newsletter!

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Image shown: Valuentum migrated to a weighting range format for the Best Ideas Newsletter portfolio ideas beginning in 2018. This article was sent to members via email March 15. By Brian Nelson, CFA I was on social media the other day, and somebody was asking whether there would be more engagement/likes/appreciation from a picture of a cat than if someone were to put up great stock picks year after year. I think the poll came back in favor of the cat pictures! It’s an interesting time, and investors are tuning out great research because they simply don’t know what to listen to. They don’t know the real deal, and that’s why writing Value Trap: Theory of Universal Valuation was so important. It’s … Read more