Citi is my number one pick, says Wells Fargo's Mike Mayo
Speakers
Mike Mayo
— Head of US Large-Cap Bank Research, Wells Fargo
Summary
Mike Mayo of Wells Fargo discusses Jamie Dimon's future at JPMorgan and the bank earnings season. He names Citigroup as his number one pick, calls JPMorgan and Goldman Sachs best-in-class, and outlines a constructive multiyear view on banks driven by earnings growth and deregulation. He also flags the proposed credit card rate cap as a lingering regulatory risk.
- Jamie Dimon says he loves his job and the board will decide how long he stays.
- Mike Mayo believes Dimon staying five more years would benefit JPMorgan shareholders and sees potential for JPMorgan to become the first $1 trillion market-cap bank.
- Mayo says Citigroup is his number one pick because it is a worst-in-class operator improving under Jane Fraser.
- Mayo identifies JPMorgan and Goldman Sachs as best-in-class banks due to their feedback-loop culture.
- Mayo says banks are in early stages of multiyear earnings growth and deregulation, with broad agreement on reducing bureaucracy and capital-rule uncertainty.
- Mayo notes a proposed credit card rate cap pressured bank stocks but appears to be fading, though it may resurface.
- Mayo lowered his JPMorgan estimates due to higher spending but remains positive on the franchise.
Ideas
JPMorgan best-in-class, $1T market-cap potential
JPMorgan is a best-in-class global bank with superior growth, efficiency, returns, and stock performance; CEO Jamie Dimon staying another five years would benefit shareholders, and the bank could become the first $1 trillion market-cap bank, though Mayo lowered estimates due to higher spending.
Citi top pick on turnaround
Citigroup is his number one pick because it is a worst-in-class operator that, under CEO Jane Fraser, is becoming a more normal company, which creates substantial upside in the stock price.
Goldman best-in-class via feedback loop
Goldman Sachs is one of the two best-in-class firms along with JPMorgan because of its feedback loop: it constantly identifies where it is not best and seeks to improve, such as wanting to do better in Asia.
Banks in multiyear growth, deregulation cycle
Banks are still in the early stages of a multiyear earnings growth and deregulation cycle; even without a Fed leadership change, broad agreement on reducing bureaucracy, red tape, and capital-rule uncertainty should give banks more confidence and support the sector.
