Despite lousy first-quarter gross domestic product that came in at -0.7%, the strong jobs report indicated last week that the labor market is tightening and wages are going higher. In new research reporting, Deutsche Bank thinks it is time for the Federal Reserve to start laying out their plans for rate hikes. They also think that four big U.S. banks are solid buys now.

While some banks are more interest rate sensitive than others, top U.S. banks remain a very solid place for growth investors to put capital. While strong dollar concerns have hit many stocks, staying with domestic banks, especially the four Deutsche Bank likes, could be a solid play for a rising interest rate environment.

Bank of America

This stock seems to have been in the “big bank penalty box” the longest and may offer investors a very good entry point. Bank of America Corp. (NYSE: BAC) reported solid first-quarter earnings that were driven by lower expenses and absence of substantial legal costs, which had strangled the bank for years. The first-quarter 2015 results saw year-over-year improvement and earnings of $0.27 per share were substantially up from a loss of $0.05 in the prior-year quarter. Some analysts think $2 per share earnings is not out of the question for the money center giant. Total 2015 earnings estimates are expected up 284% from last year.

The company is a ubiquitous presence in the United States, providing various banking and financial products and services for individual consumers, small and middle market businesses, institutional investors, corporations and governments in the United States and internationally. It operates 5,100 banking centers, 16,300 ATMs, call centers and online and mobile banking platforms.

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The Deutsche Bank team sees the company as the purest play on U.S. growth and rates among the banks peers, especially with most of the legal issues in the rear-view mirror.

Bank of America investors are paid a 1.17% dividend. The stock is rated Buy with a $19 price target at Deutsche Bank. The Thomson/First Call consensus price target is $18.33. Shares closed Monday at $17.08.
Citigroup

The stock may offer investors outstanding upside, and recent currency settlements were fully reserved for by the bank. Citigroup Inc. (NYSE: C) is very cheap, trading at just 10.2 times estimated 2015 earnings, the nation’s fourth-largest bank by assets delivered first-quarter earnings that jumped to $1.52 per share from $1.23 a year earlier. Analysts had expected Citi to earn $1.39 per share. While the stock has bounced sharply off the lows printed in early February, it still looks like a compelling buy here, especially with a dividend increase in the mix and a recent dip in the price.

Numerous Wall Street analysts cite the fact that Citigroup will be a leader in buyback payouts to shareholders. Combined with the bank’s strong domestic and international business, and a better overall economy, plus the headline risk over bank stress tests and settlements has been removed, shares purchases look wise here.

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The Deutsche Bank analysts feel the stock has shown good momentum, with numerous positive announcements, and they think near-term earnings-per-share should be solid. They do mention that estimates for the second half of this year and into 2016 may be too high, but that seems priced into the stock.

Citigroup shareholders are currently paid a minuscule 0.35% dividend. The Deutsche Bank price target is $56, and the stock is rated Buy. The consensus target is much higher at $62.83. Shares closed Monday at $55.65.

Goldman Sachs

This company continues to be the gold standard of Wall Street banks. Goldman Sachs Group Inc. (NYSE: GS) has a gigantic institutional equity trading desk, a solid debt and derivatives business, an ultra-high net worth clientele, top investment banking and capital markets expertise. The bank is one of the most sought after in the world, and it is one of the very few that can dictate who can be a client at the firm.

In investment banking, the company has the preeminent client franchise. Goldman Sachs advised on more than $1 trillion of announced transactions last year, the highest level since 2007. It has also maintained a leading market share over the past 25 years. It maintained a market position when M&A activity was dominated by technology in 1999, by financials in 2008 and by natural resources in 2014. The bottom line is, regardless of where market strength is in any given year, Goldman Sachs is up to the task.

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The Deutsche Bank team likes the earnings estimates going forward and feel the bank’s valuation is attractive at current levels. Like many, they cite the firm’s outstanding equity capital markets business.

Goldman Sachs shareholders are paid a 1.25% dividend. The stock is rated Buy at Deutsche Bank, with a $205 target price. The consensus target is $208.17. The stock closed Monday above both levels at $209.79.

JPMorgan

This stock trades at a very low 11.4 times estimated 2015 earnings and also has recent currency settlement funds fully reserved. JPMorgan Chase & Co. (NYSE: JPM) is expected to benefit from commercial loan growth and an upturn in capital spending. Wall Street analysts agree that the stock seems attractively valued on 2015 estimated price-to-earnings and a very solid price-to-book value. Some on Wall Street have cautioned that last year’s divestiture of the physical commodities business could provide an earnings headwind next year.

Improvement in loan growth, terrific equity capital markets and a steady increase in deposits will be a solid plus. Trading at a discount to many of the large cap banks on 2015 earnings estimates helps upside potential as well. With $2.6 trillion in assets on a worldwide basis, and one of Wall Street’s savviest leaders in Jamie Dimon, the stock is a solid buy for investors.

Deutsche Bank likes the current valuation and feels that current cost saving and capital optimization initiatives could prove meaningful.

JPMorgan investors are paid a 2.7% dividend. The stock is rated Buy at Deutsche Bank with a $66 target, and the consensus target is $70.79. Shares closed on Monday at $66.89.

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Despite rating these stocks at Buy, the Deutsche Bank price targets currently are at or are being exceeded. We will keep a close out for any increase in the targets, or downgrades of the stocks.

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