To The Moon

🌟🌟🌟The US markets closed higher today on news that the latest US inflation data was lower than expected.   It was simply the best day since April as all the 3 indexes closed higher.

All the Top 4 US banks share prices jumped on the good news. $Bank of America(BAC)$ 

was the Star Performer with an increase of 5.4% today, followed by $Citigroup(C)$ 

at 3.8%. $Wells Fargo(WFC)$ 

is up 3.2% and $JPMorgan Chase(JPM)$ 

is up 1.8%.

Banks benefit when interest rates are stable or expected to decrease.  Lower inflation and the potential for rate cuts suggest that the Federal Reserve may not be compelled to raise interest rates so quickly. 

The Big 4 US banks can profit from a stable or lower rate environment because they  can reduce their borrowing costs, which will in turn boost their profitability. 

Banks also make money by borrowing at lower short term rates and lending at higher long term rates.  If there is anticipation of stable or lower rates, it encourages borrowing, which can lead to increased lending activities.  This scenario can positively impact the banks' revenue streams.

JPMorgan is the largest bank in the US and the world with a market capitalisation of USD 419.25 billion.  It is also the most profitable among the Big 4.  In its latest 3Q 2023 earning report, JPMorgan reported revenue of USD 39.9 billion.  It generated a net income of USD 13.2 billion.  JPMorgan CET1 capital ratio rose even further to 14.3%.  Its liquidity is extraordinarily high with cash and marketable securities of USD 1.4 Trillion.  

JPMorgan average loans are up 27% year over year and up 9% quarter over quarter.  JPMorgan pays a dividend of USD 1.05 per share or USD 3.1 billion.  The current dividend yield is 2.83%.

Perfornance wise, JPMorgan is up 9.8% year to date and 11.6% in the past year.  Wall Street Analysts are bullish on JPMorgan with a Buy rating, Target price of USD 170.21, an upside potential of 14%.

Bank of America is the 2nd largest bank in the US with a market capitalisation of USD 231.52 billion.   In its 3Q 2023 Earnings report, Bank of America's net income rose 10% to USD 7.8 billion or 90 cents per share compared to USD 7.1 billion or 81 cents per share for Q3 2022.  

Revenue increased by 3% to USD 25.2 billion.  Net Interest Income is up USD 614 million or 4% to USD 14.4 billion, due to higher interest rates and loan growth.   Average loans increased by 5% to USD 311 billion. 

Bank of America pays a dividend of 24 cents per share.  Its dividend yield is 3.2%.

Common Equity Tier 1 rose to 11.9%

Performance wise Bank of America is down 12.8% year todate  and 22.4% in the past year. 

Wall Street Analysts are bullish on Bank of America with a Buy rating, Target price of USD 33.65, an upside potential of 15%.

Citibank reported a net income for 3Q 2023 of USD 3.5 billion or USD 1.63 per share on revenues of  USD 20.1 billion.  Revenues increased 9% from previous year quarter due to increased strength in Institutional Clients, Personal Banking and Wealth Management businesses. 

Citibank CET1 ratio grew to 13.5%.

Citibank paid 53 cents per share in dividends.  The current dividend yield is 4.78%.

Performance wise Citibank is down 3% year todate and has dropped 9% in the past year. 

Wall Street Analysts are bullish on Citibank with a Buy rating, Target price of USD 49.65, an upside potential of 12%.

Wells Fargo reported 3Q 2023 net income of USD 5.8 billion or USD 1.48 per share.  Its revenue grew to USD 20.9 billion due to higher net interest income as it benefited from higher rates and investments.  

Wells Fargo's CET1 ratio is 11%.  It increased its dividends by 17% to 35 cents per share.  The current dividend yield is 3.3%.

Of all the 4 Banks, I believe that Bank of America has the most upside potential as its share price is down 22% in the past year.   Bank of America is also Warren Buffett 's 2nd highest holding in $Berkshire Hathaway(BRK.B)$  at 8% weightage.    Warren Buffett looks for stocks with strong financial performance and consistency over 5 to 10 years.  Bank of America fits his stringent requirements. 

The 4 Big Banks of US are the bellwether of the US Economy.  They tick all the core fundamentals of a quality stock - profitability, rock solid balance sheet, excellent management team and a wide moat too due to their extensive banking network.  

Are these 4 Top US Banks worth investing?  It is a Yes as they are the pillars of US economy and would continue to grow from strength to strength in the years to come. 

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