In the last post, we have evaluated the financial statements of JPMorgan Chase & Co. and Bank of America.
In this post, we would look at Wells Fargo, Citigroup and Goldman Sachs and see if they have durable competitive advantage.
Wells Fargo is an American banking and financial services holding company that headquarters in San Francisco, California. It is the world’s second-largest bank by market capitalization and the third largest bank in America with total assets of $1.95 trillion.
Here is the financial statement analysis of Wells Fargo:
It looks like Wells Fargo has durable competitive advantage because the company generate more than 20% of net income on total revenue. In addition, goodwill and retain earnings are on upward trends. The annual return of dividends would be 2.89% if I were to buy the stock today at the price of $54.06.
What about Citigroup? Citigroup is an American investment banking and financial services holding company that headquarters in Manhattan, New York. It is the fourth largest bank in America with total assets of $1.82 trillion.
Here is the financial statement analysis of Citigroup:
It seems Citigroup does not have the same durable competitive advantage as Wells Fargo because the company generates less than 20% of net income of total revenue, and generates lower return of equity than Wells Fargo. As a matter of fact, the annual return of dividends is only 1.78% if I buy the stock now with the price of $71.76.
Lastly, Goldman Sachs is an American investment banking, securities and investment management company that provides a range of financial services to corporations, financial institutions, governments and individuals such as asset management, mergers and acquisitions advice, prime brokerage, and securities underwriting services. With total assets of $894.09 million, Goldman Sachs is the primary dealer in the United States Treasury security market.
Here is the financial statement analysis of Goldman Sachs:
Surprisingly, Goldman Sachs has the least durable competitive advantage compared to Citigroup and Wells Fargo because the company makes less than 20% of net income of total revenue, and high return on capital expenditure. I wonder why Goldman spend quite a bit on capital expenditure (maybe Goldman has to keep renovating and updating their offices to stay competitive). By the same token, the annual return of dividend is only 1.30% if I buy the stock today with the price of $231.29.
Although some American banks are great to invest long-term, I think in general American banks just do not share the same durable competitive advantage as Canadian banks. First of all, American banks tend to spend more money on payroll. Second of all, American banks tend not to make as much net income as Canadian banks. Lastly, American banks do not generate the same annual return of dividends as Canadian banks.
I think I won’t invest in any American banks unless the American dollar weakens (remember 2011 everyone?) and the banks still give out the same dividend after their stock prices drop 50% (remember the stock market crash on 2008?).
So what do you think? Please feel free to leave any comments below! Catch you on the flip side!