Stock Analysis & Ideas

JPM, BAC, or WFC? Which Bank Stock is the Best?

Story Highlights

Bank stocks are trading at attractive discounts to their long-term historical averages, making them worth considering for long-term positions, even amid a potential recession. Analysts are bullish on all three bank stocks covered in this article, but some are more bullish than others.

Banks stocks have stood the test of time, with some of the names sustaining for centuries now. The big question is how they will fare this time with recession fears around the corner. With the help of the TipRanks Stock Comparison tool, we compared JPMorgan Chase & Co., Bank of America, and Wells Fargo to see which is the better bank stock.  

JPMorgan Chase (JPM)

Based in New York, JPMorgan Chase is a multinational investment bank and financial services holding company. With around $3.3 trillion in total assets, JPMorgan is the largest bank in the United States. Further, with a current market capitalization of $336 billion, it is also the world’s largest bank by market capitalization.

JPM stock hit its all-time high of $172.96 in October of last year but is down significantly from those levels, trading near $115.

For the month of July, the bank reported lower charge-offs, at 1.02% compared to 1.18% in June and 1.14% in the prior-year period.

The delinquency rate came in at 0.66% in July, the same as June but higher than 0.64% reported in the same period last year.

However, there was a dip in lending activity, as principal receivables declined to $9.15 billion in July compared to $10.6 billion reported in June.

Further, provisions for loan losses are also increasing as the company prepares itself against a difficult macro outlook and recessionary fears.

Despite the looming macro concerns, last month, Berenberg analyst Peter Richardson upgraded JPMorgan from Sell to Hold, with a price target of $120.00.

Richardson believes that shares are trading at a ~20% discount to their historical long-term average.

He stated, “While our estimates are c5% below consensus, we believe these risks are now more adequately reflected in the share price and upgrade JPMorgan to Hold.”

Is JPM Stock a Buy or Sell?

Turning to Wall Street, analysts are cautiously optimistic about the stock, giving it a Moderate Buy consensus rating, which is based on nine Buys, seven Holds, and one Sell. JPMorgan Chase’s average price forecast of $137.35 implies 19.8% upside potential.

In addition to this, hedge funds have a very positive outlook regarding JPM stock. They collectively increased their JPM holdings by 8.4 million shares in the last quarter.

Bank of America (BAC)

Being the world’s second-largest bank by market capitalization ($273 billion), second to JPMorgan, Bank of America is more than a century old. It provides banking and non-bank financial services. The banking major has lost almost a fourth of its market capitalization year-to-date.

According to Wells Fargo analyst Mike Mayo, the overall banking industry is bound to benefit from the ongoing rise in interest rates by the Federal Reserve.

Predicting the federal funds rate to reach 4%, he emphasizes that the level of interest rates is “far more important to bank net interest margins (high correlation) than the shape of the yield curve (no correlation) based on 50-60 years of data.”

As a result, he expects banks like bank of America to benefit and report higher net interest margins.

Last week, Bank of America announced that its eligible customers would get free access to Grubhub’s popular subscription service, which could benefit both companies.

Also, last month, the bank hiked its quarterly dividend by 4.8% to $0.22 per share. The dividend is payable on September 30 to shareholders of record on September 2, 2022.

Following the quarterly earnings released last month, Jefferies analyst Ken Usdin increased his Bank of America price target to $34 from $33 and reiterated a Hold rating. Further, Usdin revised his full-year 2022-23 estimates upward due to lower expected provisions.

What is the Target Price for BAC Stock?

Currently, analysts are slightly bullish on BAC stock. Based on 11 Buys and five holds, the stock carries a Moderate Buy consensus rating, as per TipRanks. BAC’s average price target of $42.40 presents upside potential potential of 24.6% from the current levels.

Further, BAC boasts an 8 out of 10 on TipRanks’ Smart score rating system, implying that the stock has solid potential to outperform the market, going forward.

Wells Fargo (WFC)

Based in California, Wells Fargo is a diversified financial services company that provides banking, insurance, investments, mortgages, and more. It currently has a current market capitalization of about $167 billion.

Interestingly, Wells Fargo has decided to slash the size of its mortgage lending business. Having been the #1 mortgage lender for years, the change comes with the new CEO, Charlie Scharf, at the helm, who is making strategic efforts to improve the company’s regulatory score.

WFC generated over $200 billion in new loans last year but has now decided to sever its ties with its partner mortgage firms.

Like Bank of America, Wells Fargo also increased its quarterly dividend by 20% to $0.30 per share.

Is Wells Fargo Stock a Buy or Sell?

Analysts are unanimously optimistic about Wells Fargo’s prospects. The stock commands a Strong Buy consensus rating based on 11 Buys and two Holds. Also, WFC’s average price forecast of $53.54 suggests 21.8% upside potential.

Moreover, financial bloggers are 79% Bullish on WFC stock versus the sector average of 68%.

Conclusion: Analysts are Most Bullish on BAC and WFC

With impending recession fears, banking stocks are in a tricky spot. Nonetheless, Wall Street analysts estimate a higher upside potential in BAC and WFC compared to JPM stock. However, all three stocks look attractive at current levels.

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