Today’s volume is 29.5 M compared to 10 day average of 12.5m, yet the stock barely moved. 5 Analysts came out with higher price target between $85 to $90, and expect more analysts to increase the price target as they update their model.
Here is my thesis:
- This should unleash next 3 to 5 years of growth
- The bank in anticipation of asset cap removal, identified few areas of growth and made some investments, and increased hiring. They are focusing on IB, wealth, this should drive fee income.
- The bank over next 3 to 5 years should be able to attract around $300 to $500 B in deposits, at the low end (at just 1% NII on $300 B deposits) this should add $1 to EPS, and at high end (at 2% NII on $500 B deposits) this should add $3 EPS.
- It will take the bank 12 to 18 months for the bank to show the gains in deposits, loans, fee income and EPS. If the stock price trades in the range remember the bank has already announced $46 B of share buyback, that should reduce 15 ~ 20% of the outstanding shares.
- The bank pays $1.6 annual dividend, at today’s price it yields 2.12%. expect this to be increased steadily to $2 to $2.5.
- The bank has excess capital, that will allow it to invest in growth, repurchase shares and pay dividend, depending on growth, share price they can flex buyback or dividend.
- Lastly, expect banking de-regulation for the next 3 years.
I already have 4% position, and 1% of that is in covered call that could get called away, but I will add on every weakness and take it to 5%.