A Board Member Bought Shares of JPMorgan Chase

While Bank of America and Citigroup carry even greater discounts to the book value of their equity (Bank of America’s P/B ratio is 0.6 and Citi’s is 0.7), these two banks aren’t much more attractive than JPMorgan Chase when we look at their value in terms of earnings. Analyst consensus for 2013 has these two peers priced at 8 to 9 times earnings, in line with JPMorgan Chase, and Bank of America in particular has been struggling recently and so these projections are already pricing in a recovery in performance. We suppose that there is a case for considering Citigroup, since earnings growth was strong there as well last quarter, but JPMorgan Chase would seem to be a more reliable investment.

Barclays PLC (NYSE:BCS) carries a P/B ratio of 0.7, so its discount is similar to that of Bank of America or Citigroup. However, it has been reporting low earnings and the sell-side is less bullish on the company than those we’ve previously discussed; while a current-year P/E of 10 is not high, it is a premium relative to other large banks and so we would avoid the stock. Wells Fargo trades at 10 times trailing earnings and delivered a 24% improvement on the bottom line last quarter compared to Q4 2011. We’d say that in terms of earnings metrics it is cheap, and may also be a good buy if an investor is willing to invest in or at least look at multiple bank stocks, but at a market cap greater than its book value we think that we would prefer JPMorgan Chase. More generally, we would note that large banks seem cheap and we now have two that have seen insider purchases in the first month of 2013.

Disclosure: I own no shares in any stocks mentioned in this article.