Wells Fargo & Co (WFC): Are Big Banks Still at Risk?

Competing with Wells Fargo & Co (NYSE:WFC), the company aims to be the industry’s best deposit franchise. Total deposits surged 7% YOY to $1.2 trillion in the 1Q 2013. Additionally, JPMorgan Chase & Co. (NYSE:JPM) will be able to leverage its strong deposit base when interest rates finally rise.

JPMorgan Chase & Co. (NYSE:JPM) currently trades at 9.4 times its earnings, a 25% discount to competitors’ mean valuation. JPMorgan’s intention to buy back shares from the second quarter of 2013 onwards will boost investors’ confidence in the stock. However, it doesn’t look like an outperforming stock in the market and so for this reasons I recommend to hold.

Bottom line

Even though the macroeconomic environment will influence results, an extended period of (1) deleveraging, combined with (2) an extended low interest rates environment and (3) greater scrutiny from regulators, could dramatically reduce profitability for any of these banks. While Bank of America Corp (NYSE:BAC) and J.P. Morgan Chase do not offer convincing reasons for a buy recommendation, Wells Fargo & Co (NYSE:WFC) is expected to deliver strong growth figures in the future. Technical analysis can also help analyse possible outcomes. I recommend investors to read this blog post which describes why it is important to pay attention to it.

Victor Selva has no position in any stocks mentioned. The Motley Fool recommends Bank of America and Wells Fargo. The Motley Fool owns shares of Bank of America, JPMorgan Chase & Co (NYSE:JPM)., and Wells Fargo.

The article Are Big Banks Still at Risk? originally appeared on Fool.com.

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