Goldman Sachs Bank Stocks: Top 5 Stock Picks

In this article, we discuss the top 5 bank stocks in the Goldman Sachs portfolio. If you want to read our discussion on the banking industry, head over to Goldman Sachs Bank Stocks: Top 10 Stock Picks. 

5. American Express Company (NYSE:AXP)

Goldman Sachs’ Stake Value: $594,833,757

Number of Hedge Fund Holders: 77

American Express Company (NYSE:AXP) provides credit cards, banking, and travel-related services worldwide. It is one of the top Goldman Sachs bank stocks. In the first quarter of 2023, Goldman Sachs held 3.60 million shares of American Express Company (NYSE:AXP) worth $594.8 million, representing 0.12% of the total portfolio. 

On July 21, American Express Company (NYSE:AXP) reported Q2 GAAP earnings per share of $2.89, beating market estimates by $0.08. However, the revenue increased 12.3% year-over-year to $15.05 billion, yet fell short of Wall Street consensus by $310 million. 

According to Insider Monkey’s first quarter database, Warren Buffett’s Berkshire Hathaway held the largest stake in the company, with 151.6 million shares worth $25 billion. Overall, 77 hedge funds were long American Express Company (NYSE:AXP) during the March quarter. 

ClearBridge Large Cap Value Strategy made the following comment about American Express Company (NYSE:AXP) in its first quarter 2023 investor letter:

“Other financial holdings were among the top contributors, such as American Express Company (NYSE:AXP), whose business is less sensitive to changes in the yield curve than most financials, and Progressive, which has minimal interest rate mismatch exposure.”

4. UBS Group AG (NYSE:UBS)

Goldman Sachs’ Stake Value: $804,369,971

Number of Hedge Fund Holders: 30

UBS Group AG (NYSE:UBS) is next on our list of the top Goldman Sachs bank stocks. UBS Group AG (NYSE:UBS) was founded in 1862 and is based in Zurich, Switzerland. The company operates through four segments – Global Wealth Management, Personal & Corporate Banking, Asset Management, and Investment Bank. At the end of Q1 2023, Goldman Sachs held 37.7 million shares of UBS Group AG (NYSE:UBS) worth $804.3 million. 

On August 11, UBS Group AG (NYSE:UBS) stock price increased by 4.9% as the bank chose to end a CHF 9 billion ($10.3 billion) loss protection guarantee provided by the Swiss government. This guarantee was initially offered as part of the government-mediated acquisition of Credit Suisse. UBS Group AG (NYSE:UBS) reviewed its assets following the completion of the Credit Suisse takeover and concluded that the loss protection guarantee and a CHF 100 billion ($114.1 billion) public liquidity backstop were no longer needed. All loans had been repaid by Credit Suisse.

According to Insider Monkey’s first quarter database, UBS Group AG (NYSE:UBS) was part of 30 hedge fund portfolios, up from 16 in the prior quarter. Richard S. Pzena’s Pzena Investment Management held a prominent stake in the company, comprising 3.78 million shares worth $80.85 million. 

Bronte Amalthea Fund made the following comment about UBS Group AG (NYSE:UBS) in its first quarter 2023 investor letter:

“The biggest thing that happened in markets in the quarter was the collapse of three banks:—Credit Suisse, Silicon Valley Bank and Signature Bank. We have held short positions in each of these banks, but we traded them poorly and profits were smaller than they could have been.

We have also purchased the successor banks for two of them. We initiated positions in UBS Group AG (NYSE:UBS), which has purchased Credit Suisse under advantageous terms, and First Citizens Bank, which purchased much of Silicon Valley Bank on even more advantageous terms.

We will go through each of these banks in turn as they are (a) interesting in their own right and (b) have resulted in some changes in our portfolio.

Swiss banks were sharply weakened by the end of banking secrecy. Historically, Switzerland was a clean place to hide your dirty money and Swiss Banking was almost synonymous with tax avoidance.…” (Click here to read the full text)

3. Morgan Stanley (NYSE:MS)

Goldman Sachs’ Stake Value: $841,230,763

Number of Hedge Fund Holders: 51

Morgan Stanley (NYSE:MS) is one of the top Goldman Sachs bank stocks. In the first quarter of 2023, Goldman Sachs owned 9.58 million shares of Morgan Stanley (NYSE:MS) worth $841.2 million, representing 0.17% of the total portfolio. 

On July 18, Morgan Stanley (NYSE:MS) declared a $0.85 per share quarterly dividend, a 9.7% increase from its prior dividend of $0.78. The dividend is payable on August 15, to shareholders of record on July 31. 

According to Insider Monkey’s first quarter database, Morgan Stanley (NYSE:MS) was part of 51 hedge fund portfolios, compared to 55 in the prior quarter. Boykin Curry’s Eagle Capital Management is a prominent stakeholder of the company, with 5.4 million shares worth $477.5 million. 

Here is what Madison Dividend Income Fund has to say about Morgan Stanley (NYSE:MS) in its Q3 2022 investor letter:

“This quarter we are highlighting Morgan Stanley (NYSE:MS) as a relative yield example in the Financial sector. MS is a leading investment bank and wealth management firm with approximately $5 trillion of client assets under management. It merged Citigroup’s Smith Barney business into its own wealth management business after the 2008 recession/financial crisis, which resulted in a more stable business model. Recent acquisitions of asset manager Eaton Vance and E-Trade provide additional stability and higher returns on capital. We believe MS has a sustainable competitive advantage due to its size and scale, global reach, strong reputation, and financial distribution capabilities. Importantly for a financial institution, it is in good financial health as key leverage ratios including common equity Tier 1 ratio, Tier 1 capital ratio, Tier 1 leverage ratio, and supplementary leverage ratio were all well above required minimums at the end of 2021.

Our thesis on MS is that its wealth management business will continue to become a larger part of the overall company, which will increase overall margins and return on equity (ROE). Wealth management and asset management are less cyclical than investment banking, and often generate higher margins and provide better stability of financial results. For example, the addition of Smith Barney added significant scale and boosted wealth management operating margins from below 10% into the mid-20%s over the past several years while also increasing returns on equity. Looking ahead, we believe the company will benefit from rising asset prices and higher interest rates, should they happen over time…” (Click here to see the full text)

2. Bank of America Corporation (NYSE:BAC)

Goldman Sachs’ Stake Value: $944,620,987

Number of Hedge Fund Holders: 91

Bank of America Corporation (NYSE:BAC) is one of the top bank stocks from the Goldman Sachs portfolio. Securities filings for Q1 2023 reveal that Goldman Sachs held 33 million shares of Bank of America Corporation (NYSE:BAC) worth $944.60 million, representing 0.20% of the total holdings. 

On July 29, Bank of America Corporation (NYSE:BAC) declared a $0.24 per share quarterly dividend, a 9.1% increase from its prior dividend of $0.22. The dividend is payable on September 29, to shareholders of record on September 1. 

According to Insider Monkey’s first quarter database, Bank of America Corporation (NYSE:BAC) was part of 91 hedge fund portfolios, compared to 100 in the earlier quarter. Warren Buffett’s Berkshire Hathaway is the leading stakeholder of the company, with 1.03 million shares valued at $29.5 billion. 

ClearBridge Large Cap Value Strategy made the following comment about Bank of America Corporation (NYSE:BAC) in its first quarter 2023 investor letter:

“Our quality bias has always led us to gravitate toward banks with strong and diverse deposit bases; those we own tend to be the larger players, which we also expect to be the biggest beneficiaries from a flight to safety in terms of deposits. JPMorgan Chase comes to mind especially here, but so does Bank of America Corporation (NYSE:BAC) despite its weakness in March, as well as U.S. Bancorp, to which we added opportunistically in the quarter.”

1. JPMorgan Chase & Co. (NYSE:JPM)

Goldman Sachs’ Stake Value: $2,365,161,089

Number of Hedge Fund Holders: 112

JPMorgan Chase & Co. (NYSE:JPM) is the biggest bank stock in the Goldman Sachs portfolio. Goldman Sachs, as of the first quarter of 2023, owned 18.15 million shares of JPMorgan Chase & Co. (NYSE:JPM) worth $2.3 billion, representing 0.5% of the total holdings. 

On July 14, JPMorgan Chase & Co. (NYSE:JPM) reported a Q2 non-GAAP EPS of $4.37 and a revenue of $41.3 billion, outperforming Wall Street estimates by $0.61 and $2.45 billion, respectively. 

According to Insider Monkey’s Q1 data, 112 hedge funds were long JPMorgan Chase & Co. (NYSE:JPM), compared to 100 funds in the last quarter. Ken Griffin’s Citadel Investment Group is a prominent stakeholder of the company, with 5.3 million shares worth nearly $697 million. 

Manole Capital Management made the following comment about JPMorgan Chase & Co. (NYSE:JPM) in its second quarter 2023 investor letter:

“It will be interesting to see what kind of policy decisions are made around regulation for institutions that are between $100 billion of assets and $700 billion of assets. As JPMorgan Chase & Co. (NYSE:JPM)’s purchase of First Republic shows, scale is a competitive advantage. It now has 13% of total US deposits and it manages 21% of America’s credit card spending. With additional regulatory burdens coming, banks are facing a profitability headwind and 100 to 300 basis points of possible ROE erosion.

The banking sector is facing a slow-moving crisis, but we aren’t sure it is enough to sink the overall health of the US consumer or economy. Credit will contract and lending standards will continue to rise. However, we do not see this problem escalating to the size and scale of previous banking crises.

Jamie Dimon, Chairman and CEO of JP Morgan Chase clearly sees the risks these FINTECH companies present. In his annual letter to shareholders, he stated that all incumbent banks should be “scared shitless” of these FINTECH rivals. Not only is his bank being attacked from multiple angles, but Apple just launched a cash management program with Goldman Sachs. On the first day of Apple’s savings program, it raised $400 million and eclipsed $1 billion in its first four days. Dimon specifically labeled Apple a bank the other day in an interview when he said, “It may not have insured deposits, but it’s a bank. If you move money, hold money, manage money, lend money — that’s a bank.”

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