Skip to main content
Complete Olympic Games coverage at your fingertips
Your inside track on the Olympic Games
Enjoy unlimited digital access
$1.99
per week for 24 weeks
Complete Olympic Games coverage at your fingertips
Your inside track onthe Olympics Games
$1.99
per week
for 24 weeks
// //

What are we looking for?

U.S. banks recently reported quarterly earnings and there is a general theme of strong results, with many names passing stress tests with flying colours as pandemic restrictions ease. There were even some dividend increases and share buybacks.

Banks are known to possess some of our favourite investment qualities. As a result, my team member Allan Meyer and I thought we would take a closer look at the U.S. sector using our investment philosophy based on safety and value.

The screen

We started our search by looking at the bank sector in the S&P 500 index. Then we looked at market capitalization as a safety factor; larger companies tend to have more stable and diverse revenue streams. The list is sorted on this, from largest to smallest. Dividend yield is the annualized projected dividend divided by the recent share price. Dividends can reflect safer and steadier earnings profiles, and Allan and I like to get paid while we wait for capital appreciation. Debt-to-equity is our final safety measure; it is the total debt outstanding divided by shareholders’ equity. A smaller number indicates lower leverage or debt levels. And as we like to say, it’s hard to go bankrupt if you have little to no debts.

Story continues below advertisement

Price-to-earnings (P/E) is the recent share price divided by the projected earnings per share. It is a valuation metric; the lower the number, the better the value. Earnings momentum is the change in annualized earnings over the past quarter. A positive number implies earnings are growing while the opposite is true for a negative number. Positive earnings momentum over the long term should translate to share price gains and perhaps dividend hikes. Price-to-book (P/B) compares the recent share price with the book or equity value per share. This is another valuation metric; a lower number is preferred. ROE is a profitability ratio (net income divided by shareholders’ equity); a higher number is better.

We’ve also calculated the average and median for all metrics to allow for better comparability and provided the 52-week total return to track performance.

What we found

Banking on safety and value in strengthening U.S. sector

CompanyTickerRecent Price (US $)Mkt. Cap. (US$ Bil.)Div. Yld. (%)Debt/Equity (%)P/EEarns. Mom. (%)P/BROE (%)52W Ttl. Rtn. (%)
JPMorgan Chase & Co.JPM-N156.03472.32.3194.125.243.01.712.068.9
Bank of America Corp.BAC-N41.15352.61.7165.113.326.61.36.877.8
Wells Fargo & Co.WFC-N45.07186.30.9147.112.2253.71.01.079.3
Citigroup Inc.C-N70.41145.52.9243.68.149.60.75.940.8
US BancorpUSB-N57.5785.82.997.612.723.81.710.062.0
PNC Financial ServicesPNC-N192.7981.92.662.414.432.11.511.893.2
Truist Financial Corp.TFC-N56.0375.43.259.411.89.21.16.858.5
First Republic BankFRC-N190.5533.60.515.137.910.22.69.381.2
SVB Financial GroupSIVB-Q565.2130.70.010.520.932.73.116.8164.8
Fifth Third BancorpFITB-Q38.4427.12.868.911.637.91.26.2111.4
Huntington BancsharesHBAN-Q14.3521.24.265.710.264.31.16.871.5
KeyCorpKEY-N20.7220.13.681.710.038.61.17.981.1
Citizens Financial GroupCFG-N46.0519.63.437.820.060.10.94.699.3
Regions Financial Corp.RF-N20.2619.53.119.79.949.51.16.294.7
M&T Bank Corp.MTB-N145.9318.83.027.412.214.71.18.748.1
Comerica Inc.CMA-N71.7310.03.836.411.788.41.26.2110.2
Zions BancorporationZION-Q53.268.72.636.910.961.01.16.667.0
People's United FinancialPBCT-Q17.217.44.220.912.73.21.06.760.3
Average89.82.677.214.849.91.47.881.7
Median28.92.960.912.238.21.16.878.6

Source: Refinitiv Eikon & Wickham Investment Counsel Inc.

Huntington Bancshares Inc. and Regions Financial Corp. score well across the board for safety and value. Truist Financial Corp. looks good but fall short on earnings momentum. Huntington also offers the highest dividend yield along with People’s United Financial Inc. SVB Financial Group has the lowest debt levels and boasts the best profitability (ROE). Citigroup Inc. is the most attractive from a valuation standpoint with the lowest P/E and P/B, but also carries the most debt. Wells Fargo & Co. posted the strongest earnings momentum and it should be noted that it recently hiked its dividend.

BMO Equal Weight U.S. Banks Hedged to CAD Index ETF (ZUB) is an option for investors who like the sector, but prefer to diversify away individual security and currency risk.

Investors should contact an investment professional or conduct further research before buying any of the securities listed here.

Sean Pugliese, CFA, is an investment portfolio manager at Wickham Investment Counsel, helping individuals, families and other investors.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow the author of this article:

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error Editorial code of conduct
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies