Wells Fargo & Co (WFC) & JPMorgan Chase & Co. (JPM): These Two Banks Lack Catalysts For Future Growth

As mortgages are a sizable part of bank’s business, the future rates are important for their outlook. I do not see rates falling if the economy does not significantly slow down, and recent data is against this assumption. The Fed is unlikely to print more money either. In fact, it is likely to reduce its bond purchasing program when it finally sees that economy can go on its own. At some point of time, they would stop the purchases. They can’t last forever, and that should be taken into account.

Bottom Line

Bank stocks have had a good year, but now they can be struggling with a catalyst for future growth. JPMorgan is a little undervalued with a 9.2 forward P/E, while Wells Fargo trades at a 10.9 forward P/E and Bank of America Corp (NYSE:BAC) trades at a 10.5 forward P/E.

Analysts’ target prices reflect the thesis that the banks are fairly valued. Wells Fargo & Co (NYSE:WFC) and Bank of America Corp (NYSE:BAC) are trading in the whereabouts of target prices, while JPMorgan Chase & Co. (NYSE:JPM) still has a 5.6% upside if judged by mean analyst target price.

On the income front, Wells Fargo yields 2.40% while JPMorgan yields 2.80%. Bank of America is an outsider with a 0.30% yield. I do not expect stellar performance from any of these stocks. Positive growth that is likely to come from the asset management side would be likely offset by the decline in mortgage origination. The banks’ performance in the recent quarter was strong, but they need even stronger performance to continue the rise. I don’t see this coming in the near term.

The article These Two Banks Lack Catalysts For Future Growth originally appeared on Fool.com.

Vladimir is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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