Home>Video>With Banks, More Good News Than Bad, Finally

With Banks, More Good News Than Bad, Finally

Wed, 17 May 2017

Wells Fargo and Citigroup are recovering from their struggles, but we think there's room for caution.


Video Transcript

Jim Sinegal: For the first time in a long time, good news is starting to outweigh bad news for banks. However, the good news is more than reflected in the stock price, and there's a little bit of room for caution. 

We've started to see the first hints that credit quality is starting to worsen. Loan losses in auto loans and credit cards started to tick up in the first quarter. We also seem to have taken a breather on the interest-rate front. We've been saying for a long time that interest rates will be slow to rise due to a combination of demographics, changes in the leverage cycle, and advances in technology.

That said, we favor the stocks that are less sensitive to interest rates--Wells Fargo and Citigroup. Both of those stocks have had some problems in years past. Wells Fargo had a sales scandal in the fall of 2016; Citigroup has obviously been struggling for a long time. But both of those stocks are starting to recover. Well Fargo's customers have stopped leaving, accounts are stable at Wells at the moment, and the dividend yield is approaching 3%. Similarly, Citigroup had a great first quarter. Expenses are under control and revenues are starting to rise again.

  1. Related Videos
  2. Related Articles
  1. Value's Rough Patch Not a Concern for AQR's Ronen Israel

    Risk-based and behavioral arguments support the theory of value delivering good long -term performance, says AQR's Ronen Israel.

  2. Investing Tips for New Grads

    Morningstar's Christine Benz says graduates should start off with a good budget, balance loan repayment with investing, embrace risk capacity, and stay diverse.

  3. Top Investment Ideas for Retirement

    Retirement Readiness Bootcamp Part 5: Morningstar strategists share their top fund, ETF, and dividend stock picks to fill your retirement portfolio.

  4. Special Report: Investing in a Volatile World

    Morningstar's top strategists discuss their tips for investing in a rising-rate environment, where equity values lie, and some of their favorite investment ideas right now in this special midyear roundtable.

  5. Sharpen Your Portfolio Plan for 2014 and Beyond

    Roundtable Report: At the outset of 2014, Morningstar strategists dig into the market's current valuation and expected return, seek out high-quality U.S. and foreign stock opportunities, size up the role of cash today, assess the Fed's impact on the market, and reveal the best ways to fight inflation.

  6. Finding Value in a Challenging Market Environment

    In this special one-hour presentation, Morningstar experts share their takes on how investors can navigate a world with slightly overvalued stocks , an uncertain interest - rate environment, and a slow-growing economy.

  7. How to Invest in a Slow-Growth World

    Panelists at the Morningstar Individual Investor Conference discuss how to position for profit amid anemic growth, energy volatility, the threat of inflation, and extraordinary central bank activity.

  8. Top Picks From Morningstar's Strategists

    Morningstar investment experts Russ Kinnel, Matt Coffina, Josh Peters, and Sam Lee answer viewer questions about the current market and the best opportunities in stocks , funds, and ETFs today.

©2017 Morningstar Advisor. All right reserved.