Which of Buffett’s bank stocks can make you the most money?

This is the quarter when investors see what has changed in the stock portfolio of Warren Buffett and Berkshire Hathaway’s management team.

Big splash on BRK.B, Berkshire Hathaway Inc.
+ 1.72%
The 13F filing with the Securities and Exchange Commission for the end of the first quarter resulted in Buffett deciding that he held shares in Wells Fargo & Co. WFC.
+ 3.55%
Long enough and it’s time to start buying Citigroup Inc. C,
+ 7.56%.

So this is a good time to look at all the bank stocks in Berkshire’s stock portfolio. Investment managers of a certain size must disclose their holdings of publicly traded stocks within 45 days as the last day of the quarter. The deadline was Monday.

First, here is the stock of Berkshire Bank as of March 31, according to the market price of Berkshire shares, in dollars:

Bank

Ticker

Berkshire Holding Price – 31 March

Market cap of the company – 31 March

Berkshire Ownership%

Bank of America Corporation.

BAC

$ 41,636,346,979

$ 332,637,209,586

12.52%

American Express Co.

AXP,
+ 3.46%

28,351,200,900

$ 141,613,024,300

20.02%

US Bancorp

USB,
+ 2.86%

6,719,110,694

$ 78,980,900,000

8.51%

Bank of New York Mellon Corporation

BK,
+ 3.12%

$ 3,591,100,392

$ 40,056,683,684

8.97%

Citigroup Inc.

C,
+ 7.56%

2,945,319,560

103,698,554,700

2.84%

Ally Financial Inc.

Friend,
+ 6.22%

389,990,382

14,231,264,880

2.74%

Source: Berkshire Hathaway 13F filing March 31, 2022, Factset.

Top Shareholder of Berkshire Hathaway Bank of America Corporation BAC,
+ 3.39%,
American Express Company AXP,
+ 3.46%,
US Bancorp USB,
+ 2.86%
And Bank of New York Mellon Corporation BK,
+ 3.12%.

Here are the valuations, dividend yields and returns on average tangible common equity (ROE) and average assets (ROA) for the group’s most recently reported quarters. Wells Fargo was added to the bottom of the list of banks as Berkshire unloaded the entire stake, followed by the total numbers calculated by FactSet for the S&P 500 banking sector:

Bank or group

Ticker

Price / real book

Forward P / E

Production dividends

ROE

ROA

Bank of America Corporation

BAC,
+ 3.39%

1.67

10.2

2.41%

17.87%

1.00%

American Express Co.

AXP,
+ 3.46%

6.43

16.2

1.33%

44.50%

4.04%

US Bancorp

USB,
+ 2.86%

2.15

10.8

3.81%

21.14%

1.26%

Bank of New York Mellon Corporation

BK,
+ 3.12%

2.42

9.2

3.15%

19.76%

0.77%

Citigroup Inc.

C,
+ 7.56%

0.60

7.5

4.30%

11.83%

0.77%

Ally Financial Inc.

Friend,
+ 6.22%

1.04

5.3

3.10%

22.13%

1.60%

Wells Fargo & Co.

WFC,
+ 3.55%

1.20

9.6

2.37%

15.23%

1.06%

S&P 500 Bank

1.60

9.6

3.10%

12.05%

1.08%

Source: Factset

ROE and ROA do not always make identical comparisons. American Express tops the list for both systems because its core income is transaction processing and fee income from card membership, instead of interest income on loans.

Bank of New York Mellon has a higher ROE, while its ROA is lower because it also focuses on fee earnings – from securities custody and asset management services.

Ally Financial Inc. ALLY,
+ 6.22%
There are second-highest ROEs and ROAs, which reflect the focus on automated lending.

Citigroup is the cheapest bank stock held by Berkshire on a price-to-book basis. Many investors distrust the company for two reasons: it has been restructuring itself for decades following a series of large acquisitions that ended in 2001. And during the 2008-2009 credit crisis, the bank’s extraordinary government bailout reduced the general equity so much that the stock was down 89% for 15 years until May 13, 2022, including dividend reinvestment.

Buffett seems to have faith in Citigroup. Dick Bowe, an analyst at Odeon Capital Group, did the same, giving City a “buy” rating with a target price of $ 57.35, a 21% gain from the stock’s May 16 closing price of 47 47.46. That’s because Citi is now “one of the most powerful companies in the country,” Bow wrote in a May 7 note to clients.

Citi’s ন 272 billion in cash equals 2.7 times its market capitalization and 1.5 times that of the general public.
Equity, ”Bow wrote.

Based on Citi’s updated market cap in the first table above, its cash is now valued at 2.6 times its ordinary equity. Bow added that with debt only 28% of assets and 50% of deposits, and with most securities investments having “some kind of government guarantee”, “it’s not unfair to argue it’s a fortified balance sheet.”

So Bow’s thesis for City is not that it will be such a strong performer in the short term, especially if the United States is heading for a recession, as Bow expects. It’s a long-running drama for him and probably for Berkshire Hathaway as well.

“[I]Investors are completely misunderstanding the risks of this company. It is rich in cash and securities. The stock just doesn’t reflect that, ”Bow wrote.

Here is a summary of the views of six banks held by Berkshire and Wells Fargo at the end of the first quarter, among analysts surveyed by FactSet:

Bank

Ticker

Share “Buy” rating

Last price – 16 May

Consensus price goals

Implied 12-month reverse probability

Bank of America Corporation

BAC

64%

$ 34.81

48.78

40%

American Express Co.

AXP,
+ 3.46%

48%

$ 156.43

$ 196.95

26%

US Bancorp

USB,
+ 2.86%

35%

48.27

60.60

26%

Bank of New York Mellon Corporation

BK,
+ 3.12%

47%

$ 43.24

$ 54.50

26%

Citigroup Inc.

C,
+ 7.56%

56%

47.46

$ 65.18

37%

Ally Financial Inc.

Friend,
+ 6.22%

81%

$ 38.73

$ 58.60

51%

Wells Fargo & Co.

WFC,
+ 3.55%

73%

$ 42.21

$ 59.86

42%

Source: Factset

Among the analysts working for brokerage firms, Ally Financial is the favorite among the stocks of these seven banks.

Don’t miss: 15 stocks that have lost at least 33% but still have a standout in their sector by these measures.

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