As we have written in the past, we strongly favour U.S. mid-cap banks – i.e., those with assets under $100 bln. These 200+ banks are growing (much) faster than their large-cap peers, are generally more rate sensitive, and are merging. And crucially, they have less regulatory risk.
Up until recently, the epicentre of regulatory risk among the mega-caps has been banks with global investment banking operations (i.e., in the U.S., C, JPM, BAC, MS, and GS and in Europe, BARC.LN, DBK.GY, CSGN.VX, and UBS.VX). Which brings us to Wells Fargo (WFC), long considered one of the best large-cap banks in the world. The market appeared to have the mistaken belief that its consumer focused strategy translated into materially lower regulatory risk than its more capital markets focused peers. Read More»