Wells Fargo - the big bank with big potentialLea Jakobiak
As earnings season heats up, investors are turning their focus towards the finance sector, in particular the biggest US banks. Jim Sinegal, Senior Equity Analyst at Morningstar, says that so far results have been disappointing "because of the legal expenses big banks have to pay". He also warns these financial institutions are going to have to face these costs "for the foreseeable future".
Jim reckons banks that have the best outlook are the ones with a strong exposure to emerging markets. For this reason, investors should bare in mind that Bank of America, for example, is heavily exposed to the US consumers, but that on the other hand Citigroup is "seeing decent loan growth in Latin America and Asia".
Another piece of advice from Jim is to distinguish banks by dividend yields. On that basis he thinks Wells Fargo and JP Morgan are most attractive. In fact, he adds Wells has "most potential going forward" because it doesn't have the legal and regulatory issues that JP Morgan will have.