This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Wells Fargo or JPMorgan Chase: Which is the Safer Bet in 2012?

NEW YORK ( TheStreet) -- JPMorgan Chase (JPM - Get Report) and Wells Fargo (WFC - Get Report) are both considered the healthiest among the U.S. banks. But which of these stocks will be the safer bet in 2012?

For now, it looks like JPMorgan is the analyst favorite, with 29 out of 32 analysts rating the stock a buy according to Reuters data. The other three analysts have a hold rating.

While the outlook for Wells is also bullish, some are less optimistic about the stock given its relatively rich valuation versus the sector. Wells trades at 157% its tangible book value per share, compared to 102% in the case of JPMorgan. Several large-cap bank stocks including Bank of America (BAC) and Citigroup (C) trade at deep discounts to book value.

25 out of 34 analysts have a buy rating on Wells Fargo, reflecting overall bullishness. Eight analysts rate the stock a hold, while one analyst has a sell on the stock. Wells also has the backing of billionaire investor Warren Buffett, which has added to its appeal.

Wells commands a strong premium relative to JPMorgan in part because of its low exposure to the volatile capital markets business. Depressed trading and deal activity hurt the "universal" banks in the second half of 2012, with concerns about the impact of the Volcker rule on banks' trading activity also depressing stocks.

Wells Fargo shares have shed only about 10% in 2011, compared to JPMorgan's 21% drop.

While investment banking is among the fastest growing businesses for Wells Fargo , analysts say it is still little more than a "rounding error" for the bank.

CFO Tim Sloan told TheStreet in a recent interview that the reason the stock commanded a premium over JPMorgan was because of its diversified business model. "I think one of the reasons we're trading at a premium--and I don't want to bad mouth JPMorgan because I think it's a very well run firm and a very effective competitor--but I think that one of the reasons we trade at a premium is we have a very diversified model, meaning that we've got a lot of businesses. None in particular is so great or so large that it creates a lot of volatility in our earnings stream," he said.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
JPM $63.24 0.64%
WFC $54.36 0.57%
AAPL $127.60 2.28%
FB $83.09 2.87%
GOOG $535.38 2.16%

Markets

DOW 18,034.93 +208.63 1.17%
S&P 500 2,100.40 +19.22 0.92%
NASDAQ 4,994.6020 +62.7870 1.27%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs