Wells Fargo & Co (WFC), JPMorgan Chase & Co. (JPM): Two Banks to Buy, One to Avoid

Investors see the rising interest rates as a strength for Citigroup Inc. (NYSE:C). The bank generates about half of its revenue from the international presence, due to which it obtains many tax reliefs. One analyst predicted that Citigroup may face the worst transaction loss and can lose from $5 billion to $7 billion if the dollar gained against the Yen and Euro.

Citigroup Inc. (NYSE:C) will not benefit from rising interest rates unless it improves its new loan request as the bank doesn’t see its mortgages as a big business.

Citigroup Inc. (NYSE:C) is now closing its units in countries where costs are higher than income in order to save more than $1.1 billion annually. The company has agreed to sell its Uruguayan unit to Itaú Unibanco, Brazil’s largest bank by market value. Uruguay’s units have more than 1500 clients and $265 million in deposits.The deal also includes the transfer of the credit card portfolio developed by Citigroup in Uruguay which has a worth of $60 million.

Conclusion

Uncertainty regarding the interest rates is enormous, but the two largest banks, Wells Fargo & Co (NYSE:WFC) and JPMorgan Chase & Co. (NYSE:JPM), are well managed to benefit from the rising interest rates as indicated by their CEOs. Despite a number of trading losses, JP Morgan has been able to generate solid profit, which is why I am bullish on it. Wells Fargo is financially strong and well maintained to remain the leader in the Mortgage market. Citigroup Inc. (NYSE:C) needs to improve its loan demand and try to mitigate the currency losses. Economic weakness in Europe and Asia may reduce the opportunity for Citigroup to generate profit.

Red Chip has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Citigroup Inc (NYSE:C) , JPMorgan Chase & Co., and Wells Fargo.

The article Two Banks to Buy, One to Avoid originally appeared on Fool.com.

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