When speaking about lenders, Bank of America Corp (NYSE:BAC) is probably the first one that comes to mind. Bank of America Corp (NYSE:BAC) is the second largest bank holding company in the U.S., and is one of the largest companies in the country in terms of total revenue. However, when it comes to the banking and financial sector, there is a difference between common commercial banks and money center banks. We’ll focus on the latter.
Money center banks are very similar to common banks when it comes to structure, but the main difference between them is that money center banks, which are usually located in major economic centers (like Hong-Kong, London, New York), do not borrow from or lend to consumers; their activities are conducted with governments, large corporations or regular banks.
However, many money center banks are usually a part of large corporations and groups, which also hold subsidiaries engaged in activities with consumers. Bank of America Corp (NYSE:BAC), for example, is a bank holding company with a large range of products in order to satisfy large corporations and governments, but at the same time, it serves consumers and small- to medium-sized enterprises.
The recent financial crisis drastically affected the financial sector, which can be easily seen looking at the numbers from the last five years. One of the figures affected the most over this time was estimated EPS growth. Bank of America Corp (NYSE:BAC), for example, lost about 40.07% of its EPS in the past five years, but as Warren Buffett likes to say, “In the business world, the rear-view mirror is always clearer than the windshield,” so it’s important to look forward.
Aside from Bank of America Corp (NYSE:BAC), there are 30 other money center banks, according to Finviz‘s standard classification system, 22 of which are located in the U.S. We have compiled a list of top 10 money center banks in terms of their estimated annual EPS growth over the next five years. To assist investors, we’ve also provided PEG ratios and dividend yields.
The former is a measure of how investors value earnings growth. A PEG below 1.0 typically hints at an undervaluation, while a PEG above 2.0 indicates an overvaluation; a figure between 1.0 and 2.0, then, indicates a “fair” value. With that being said, there are many different ranges that industries fall under when it comes to this metric, but the general rule “lower is better” universally applies here.
Let’s get started:
No.10 Bank of Montreal (USA) (NYSE:BMO)
EPS next 5 years: 8.10%
PEG: 1.32
Dividend yield: 4.59%
No.9 First Republic Bank (NYSE:FRC)
EPS next 5 years: 8.15%
PEG: 1.68
Dividend yield: 1.06%
No.8 The Bank of Nova Scotia (USA) (NYSE:BNS)
EPS next 5 years: 8.56%
PEG: 1.31
Dividend yield: 4.05%
No.7 Banco Santander-Chile (ADR) (NYSE:BSAC)
EPS next 5 years: 8.95%
PEG: 1.86
Dividend yield: 3.16%
No.6 Wells Fargo & Co (NYSE:WFC)
EPS next 5 years: 9.16%
PEG: 1.20
Dividend yield: 2.71%
No.5 State Bank Financial Corp (NASDAQ:STBZ)
EPS next 5 years: 10.00%
PEG: 2.26
Dividend yield: 0.77%
No.4 First Connecticut Bancorp Inc (NASDAQ:FBNK)
EPS next 5 years: 10.00%
PEG: 6.43
Dividend yield: 0.81%
No.3 Citigroup Inc. (NYSE:C)
EPS next 5 years: 12.00%
PEG: 1.48
Dividend yield: 0.09%
No.2 Bank of America Corp (NYSE:BAC)
EPS next 5 years: 13.58%
PEG: 3.73
Dividend yield: 0.33%
No.1 Credicorp Ltd. (USA) (NYSE:BAP)
EPS next 5 years: 15.03%
PEG: 1.11
Dividend yield: 1.39%
