Banking, finance, and taxes

Deutsche Bank Stays Bullish on 4 Buy-Rated Large Cap Banks

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Amazingly, summer is almost here, and the second quarter is down to the last month. One thing is certain: as we move into the typically slower trading months, 2018 could very well end up being a year in which the market highs already have been set. So it makes sense to look at companies, especially in the financial sector, that aren’t trading at rich multiples or 52-week highs.

With small business optimism soaring, which helps loan growth, and slowly rising interest rates providing a nice tailwind for earnings on deposits, the sector looks like a good bet for the rest of 2018. We screened the Deutsche Bank large cap bank universe, looking for companies that have solid brokerage businesses that can help to add to the bottom line, and we found these four very attractive picks.

Goldman Sachs

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

When reporting first-quarter results, Goldman posted the best equities trading results in three years, as the bank profited from the 2018 roller-coaster market. Revenue from equities trading surged 38% to $2.31 billion, trouncing the consensus analyst estimate.

Goldman Sachs shareholders receive a 1.38% dividend. The Deutsche Bank price objective is $281, and the Wall Street consensus target price is $275.43. Shares traded at $231.60 early Tuesday.

Morgan Stanley

This is another of Wall Street’s white-glove firms, and it may be among the best buys in the banking and investment arena. Morgan Stanley (NYSE: MS) is a global investment bank with leading positions in investment banking (M&A and equity underwriting), equity trading and wealth management, which contributes nearly 50% of firmwide revenues. The firm also has an asset management business, which adds to the lower-risk business profile the firm has pursued since the financial crisis.

The bank reported record first-quarter profits and revenue, as sales and earnings blew past Wall Street expectations. The firm’s net income rose more than 40% from a year earlier, and its equity trading revenue increased 30%. The bank said it benefited from “higher levels of client activity” during the quarter.

Morgan Stanley investors receive a 1.93% dividend. Deutsche Bank has a $60 price target, and the consensus target is $61.83. Shares were last seen at $51.60.

U.S. Bancorp

Deutsche Bank also favors this top super-regional bank for the rest of 2018. U.S. Bancorp (NYSE: USB) is the parent company of U.S. Bank, the fifth largest commercial bank in the United States and fourth largest by number of branches. Founded in 1929 and headquartered in Minneapolis, USBancorp offers a comprehensive line of banking, investment, brokerage, trust and mortgage services to consumers, businesses and institutions.

Many on Wall Street like the fact that USB has no meaningful capital markets exposure and has among the best risk management/credit profile in the industry, and it generates among the highest returns of peers. Fee income represents a whopping 45% of total revenue, spread over four separate business silos, providing a strong overall base. The diversity of business lines/revenue streams is expected to drive strong through-the-cycle performance, and the analysts expect overall loan growth in the range of 4% to 6% year over year.

Investors receive a 2.37% dividend. The $63 Deutsche Bank price target is well above the consensus target of $57.80. Shares traded at $49.95.

Wells Fargo

Though this large cap bank is a solid value play for 2018, it still faces the possibility of large fines. Wells Fargo & Co. (NYSE: WFC) is a nationwide, diversified, community-based financial services company with $1.8 trillion in assets. The company provides banking, insurance, investments, mortgage and consumer and commercial finance through 8,700 locations, 12,800 ATMs, the Internet and mobile banking. It also has offices in 36 countries to support customers who conduct business in the global economy. Wells Fargo serves one in three households in the United States.

Wells Fargo has slowly, but surely, become one of the biggest mortgage lending companies in the United States, in addition to its normal banking and brokerage businesses. A continued increase in commercial real estate lending could really boost the bank’s bottom line and overall revenue.

Shareholders receive a 2.88% dividend. The Deutsche Bank price target is $69. The consensus target is $60.80, and shares traded at $54.00.

These top bank stocks to buy, none of which trade anywhere close to 52-week highs, all pay solid dividends. In a pricey and much more volatile market, they all make sense for growth accounts looking to add financials.

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