Skip to main content
The Globe and Mail
Support Quality Journalism.
The Globe and Mail
First Access to Latest
Investment News
Collection of curated
e-books and guides
Inform your decisions via
Globe Investor Tools
Just$1.99
per week
for first 24 weeks

Enjoy unlimited digital access
Enjoy Unlimited Digital Access
Get full access to globeandmail.com
Just $1.99 per week for the first 24 weeks
Just $1.99 per week for the first 24 weeks
var select={root:".js-sub-pencil",control:".js-sub-pencil-control",open:"o-sub-pencil--open",closed:"o-sub-pencil--closed"},dom={},allowExpand=!0;function pencilInit(o){var e=arguments.length>1&&void 0!==arguments[1]&&arguments[1];select.root=o,dom.root=document.querySelector(select.root),dom.root&&(dom.control=document.querySelector(select.control),dom.control.addEventListener("click",onToggleClicked),setPanelState(e),window.addEventListener("scroll",onWindowScroll),dom.root.removeAttribute("hidden"))}function isPanelOpen(){return dom.root.classList.contains(select.open)}function setPanelState(o){dom.root.classList[o?"add":"remove"](select.open),dom.root.classList[o?"remove":"add"](select.closed),dom.control.setAttribute("aria-expanded",o)}function onToggleClicked(){var l=!isPanelOpen();setPanelState(l)}function onWindowScroll(){window.requestAnimationFrame(function() {var l=isPanelOpen(),n=0===(document.body.scrollTop||document.documentElement.scrollTop);n||l||!allowExpand?n&&l&&(allowExpand=!0,setPanelState(!1)):(allowExpand=!1,setPanelState(!0))});}pencilInit(".js-sub-pencil",!1); // via darwin-bg var slideIndex = 0; carousel(); function carousel() { var i; var x = document.getElementsByClassName("subs_valueprop"); for (i = 0; i < x.length; i++) { x[i].style.display = "none"; } slideIndex++; if (slideIndex> x.length) { slideIndex = 1; } x[slideIndex - 1].style.display = "block"; setTimeout(carousel, 2500); } //

What are we looking for?

U.S. banks have not fully participated in the recent market rally when compared with the S&P 500, and many are trading well below their one-year highs. They offer investors good dividends and attractive valuations, some of the cornerstones of our investment philosophy based on safety and value. Today, my team member Allan Meyer and I take a closer look at U.S. bank stocks, with the important caveat that this sector is not immune to the economic impact of the pandemic.

The screen

We started our search by filtering for banks in the S&P 500. Then we looked at market capitalization; the list is sorted from largest to smallest on this measure. It is a safety factor as larger companies tend to have more stable and diverse revenue streams and offer more trading liquidity. Dividend yield is the annualized projected dividend divided by the recent share price. Dividends can reflect safer and steady earnings profiles. Debt-to-equity is our final safety factor – it is the total debt outstanding divided by shareholders’ equity. A smaller number indicates lower leverage and as we like to say, it’s hard to go bankrupt if you have little or no debt.

Price-to-earnings 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 compares the recent share price to the book or equity value per share. This is a value measure, a lower number is preferred.

Story continues below advertisement

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

What we found

Despite being the smallest by market cap, People’s United Financial Inc. is the only name with positive earnings momentum and scores well across the board for safety and value. Citizens Financial Group Inc. is the most attractive in terms of value and scores well on most measures. Wells Fargo & Co. offers investors the highest dividend yield, but there are rumours a cut may be coming. Indeed, those seeking safety and value should note a dividend cut could occur with any of the names shown, given the impact of COVID-19.

It is interesting to note that First Republic Bank is the only name that provided investors a positive total return over the past year, but also has the most expensive valuations.

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.

Select S&P 500 bank stocks

CompanyTickerMkt. Cap. (US$ Bil.)Div. Yld. (%)Debt/Eqty. (%)P/EEarns. Momtm. (%)P/B52W Ttl. Rtn. (%)Recent Price (US$)
JPMorgan Chase & Co.JPM-N282.33.9197.514.9-18.01.1-15.592.66
Bank of America Corp.BAC-N202.13.1161.512.5-12.30.8-18.423.29
Citigroup Inc.C-N105.24.0226.210.8-10.50.5-26.950.55
Wells Fargo & Co.WFC-N103.98.1177.814.8-23.60.6-44.225.34
U.S. BancorpUSB-N54.14.7120.613.6-6.51.0-30.635.89
PNC Financial Svcs. Grp.PNC-N43.34.589.115.7-5.80.9-25.2102.15
First Republic BankFRC-N17.90.812.920.8-1.21.75.2104.62
Fifth Third BancorpFITB-Q13.25.873.610.7-18.10.6-31.318.57
M&T Bank Corp.MTB-N12.94.444.810.9-10.10.8-40.3100.59
KeyCorpKEY-N11.46.379.511.9-15.90.7-31.811.71
SVB Financial GroupSIVB-Q10.70.05.614.9-13.31.5-6.5208.34
Regions Financial CorpRF-N10.25.833.010.9-15.10.6-27.310.60
Citizens Financial GroupCFG-N10.16.664.510.3-23.30.5-30.623.76
Huntington BancsharesHBAN-Q8.77.092.812.8-22.80.7-34.98.60
Zions BancorporationZION-Q5.34.251.412.7-24.00.7-27.432.41
Comerica Inc.CMA-N4.97.748.315.0-32.70.7-48.935.27
People's United Fin'lPBCT-Q4.76.438.110.52.20.6-31.111.18
Average53.04.989.213.2-14.80.8-27.4
Median12.94.773.612.7-15.10.7-30.6

Source: Eikon & Wickham Investment Counsel Inc.

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

Comments that violate our community guidelines will be removed.

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