Money talks
JP Morgan Chase saw earnings increase from $4.9 billion in the second quarter of 2012 to $6.5 billion in the second quarter of 2013. Wells Fargo & Co (NYSE:WFC) was not too far behind with an earnings boost from $4.6 billion the second quarter of 2012 to $5.5 billion in the second quarter of 2013.
JPMorgan Chase & Co. (NYSE:JPM)’s recent earnings illustrate the “London Whale” scandal has not hurt business — trading revenue is at $5.4 billion, up 18%. The bank has even declared a preferred stock dividend on outstanding shares. All is not rosy, and with several cases against them – energy market manipulation charges, Washington foreclosure trial and new capital rules – JPMorgan Chase & Co. (NYSE:JPM) must continue to keep its “financial” nose clean.
Wells Fargo & Co (NYSE:WFC) has a strong balance sheet. Strong overall performance and a recent $8 billion acquisition of Commerzbank’s Hypothekenbank Frankfurt is just another sign of Wells Fargo’s savvy sector performance. The stock has a highly attractive dividend yield of 2.8%. All is not perfect. Wells Fargo & Co (NYSE:WFC) is laying off 350 national mortgage business employees as demand for refinancing has slowed. These layoffs are about workload, not the overall business climate, so investors should not be alarmed. Well Fargo has been aggressive by getting into overseas commercial property loans while growing retail banking branches. Well Fargo clearly wants to grow its credit card business and catch up with Bank of America, Chase, and Citi.
Straight cash, homey
Banks are increasingly boosted by rich individuals and foreign buyers who are paying cash. Investors, not just institutional investors, have been buying up American foreclosures and distressed properties at a torrid pace — often pushing out traditional buyers. Cash is king, and those who can’t pay a 20% down payment are simply priced out of the current housing market. For banks, this new trend is fueling a good portion of these banking bellwether and home-building gains. In hot areas, such as San Francisco, many Chinese buyers are snapping up property. Randy Moss was right, when you’re rich, you don’t write checks — you pay cash.
If you build it
A recent National Association of Home Builders/Wells Fargo & Co (NYSE:WFC) index of builder sentiment shows that American home-building is climbing. The index of builder sentiment rose to 57 in July, a 6-point increase since June. The recent increase in mortgage rates has not stopped the significant rise in demand for new homes. Many builders can’t keep up with the growing demand. Lennar Corporation (NYSE:LEN) provides a rich buying experience by providing great customer care via its Total Lennar Care (TLC) initiative. Educating customers at its Lennar Corporation (NYSE:LEN) Welcome Home Centers is another example of how this firm aims to provide not just a quality home, but a quality home-buying experience. Lennar Corporation (NYSE:LEN) is also operating at industry-high margins — operating margins slightly above 13% make this firm the home builder to watch.
