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Teacherman1 (< 20)

Putting Banks in Perspective



March 11, 2014 – Comments (2) | RELATED TICKERS: BAC , LYG , SAN

When investors (not traders) purchase shares of stock, they usually are looking for, and expecting future share appreciation, dividends, or ideally both.

Historically banks, especially the big ones, have performed as relatively stable, solid dividend payers, with little share appreciation, but this all changed when the "crisis" exploded on the scene in 2008/2009. When this occured, the big banks tumbled and many appreared to be on the verge of disappearing completely.

At that time, the share prices dropped to historically low levels for most, and an opportunity to buy them for share appreciation presented itself. Admittedly, some were so "scary" that nobody seemed to want them at any price.

Over the last five years, the big national banks, as well as the large regional banks have at least started to come back, with most paying at least some dividends again.

Looking at them today, they are in various stages of recovery, and present different investment opportunities to those who are willing to patiently wait out the recovery in this sector.

Of the big banks, JPM fell the least, and while paying a fairly good dividend for today, is the closest to returning to what banks have historically been. They are currently paying a dividend of about 2.70%, but likely have an upside appreciation of only about 10% to 15% left in them.

Wells Fargo, while not dropping as much as some, have not come up much. They too are paying a decent current dividend of about 2.60%, but likely have a 20% to 25% upside from here.

BAC fell the most of the big banks and presents the best current opportunity for both share appreciation and dividends. They have come back from the depths, but due to the "stupidly purchased problems of Country Wide" are still a long way from where they were. They are paying a token dividend at this time, but still have an upside potential of 200%, before they get back to historic levels.

C is a big question mark. Due to a reverse split, they have become a $5 stock selling for almost $50. It is anybodys guess as to when their future will be less cloudly.

Of the big regional banks that I follow, KEY, RF and HBAN have all made significant strides. They have shown share appreciation for those who bought when they were way down, and all are paying dividends. HBAN 2.10%, KEY 1.70%, and RF 1.10%, and all have a furture upside of about 200% from here.

Some of the big EU banks that I like are LYG, which is not paying a dividend currently, but will likely start in the not to distant future, and could have an upside appreciation in the 700% to 800% range over time. They have managed to recover from their ill conceived and government encouraged purchase of HBOS, but have had some other problems having to do with insurance sales which the regulators have required them to repay. They have managed to almost get this behind them too, and have shown good underlying profits from operations.

IRE is starting to come back, due mainly to the way in which the IRISH govt. chose to rescue them, and then the involvement of Wilbur Ross and other investors who saw a good opportunity and took it. It has an upside from here of 200% to 250%. They pay no dividend.

BBVA, which took a big hit on their Spanish real estate loans, but have been able to build up their capital to become very stable and able to wait out the return of the Spanish economy. They were paying a dividend of about 3.50%, but have stopped paying that for the time being. They have the potential for another 100% upside from here.  

San, another Spanish bank who got hit hard by the collapse of the Spanish economy and their real estate loans,  were able to deftly use their worldwide assets to shore up their reserves and capital, and are still paying a 7.00% dividend (though mostly in script for new shares), and have a potential of about 150% from here.  

This is not meant to be an exhaustive review of all banks and all bank investment opportunities, but hopefully is a starting point for some who may be new to investing, or not familiar with the banking sector, and might be looking for new opportunities for longer term investing rather than short term chasing after trading stocks.

The above is JMO and worth exactly what I am charging for it.

Good luck with your investments in these somewhat confusing economic times.  





2 Comments – Post Your Own

#1) On March 12, 2014 at 8:17 AM, lemoneater (56.79) wrote:

In January I got 11 shares in TD (Toronto Dominion) right before it doubled to 22 shares. I know I will like the 3.65% dividend yield.

Speaking of goodwill, TD has put a lot of money into downtown Greenville with a gorgeous convention center. I enjoy looking at it as I walk in the Reedy River Park. But it has also had a part helping Goderich, Ontario recover from the disastrous tornado in 2011.TD evidently understands ownership and responsibility go hand in hand.

TD is the parent of TD Ameritrade which has "done them proud."

Have a great day! 


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#2) On April 07, 2014 at 9:57 PM, Tagit (< 20) wrote:

I've been so busy with "life" I just now read this and hit (rec). 

I sold all of LYG along with all my other holdings in (stock) to invest in RF - which paid me the $$$$. However, I think LYG is still a good invite for those who are willing to wait - short wait that is. 

BAC - maybe. C- No. JP and Wells, play the market and you'll be a winner.

KEY, RF and HBAN - GET IN = (no brainer) - the recovery will happen and these 3 have much opo ahead. 

San, I think will be a mid-long haul, but worth it if you have the time. (which I don't). 

Other than that, I hope your wife, yourself and family all the best. 

Fool onward sir. YOU are the man.  

Great read. 

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