US Bancorp and Wells Fargo have already shown in the past that they are able to withstand recessionary phases, have solid balance sheets and their shares are Discounted by market.
From the beginning of the year US Bancorp has sold more than 40% of its market capitalization (in dollars as of April 20, 2020) and is now discounted by 30% compared to the fair value of 48 dollars (as of April 15, 2020).
In the past three months Wells Fargo has lost almost 50% on the stock exchange (in dollars as of April 20, 2020) since the beginning of the year and now its shares have been trading at a discount rate of 45% compared to the fair value of 50 dollars (at 14 April 2020).
Investing in US Bancorp shares: the bank is solid
US Bancorp is one of the best managed american banks and is among the most solid in terms of assets. Over the past 15 years it has consistently maintained a return on capital higher than that of its competitors and financing costs. Reason why Morningstar analysts assign her a wide economic moat.
US Bancorp efficiently combines core banking activities with other related businesses, such as investment management and payment systems, which guarantee excellent commission income.
US Bancorp is also one of the most solid on the market: it was one of the first among the American ones to emerge from the 2008 financial crisis, also thanks to its careful policy in granting loans. The management always has a 5% cost cutting plan ready to deal with the negative phases of the market promptly.
Wells Fargo shares discounted shares of 45%
Wells Fargo is the first credit institution in the United States for the collection of bank deposits and is a leader in the mortgage loan market. It also has a traditional business model, as evidenced by the low percentage of revenues deriving from trading activities. These characteristics guarantee a strong stability of the cash flows, allow it to finance its activities at costs about 40% lower than the average of the other North American banks and to achieve high economies of scale.
The bank’s activities are mainly concentrated in the United States. This facilitates management and makes it less volatile during the different market phases. With a widespread presence in the area and a wide range of services offered, Wells Fargo manages to maintain a high customer loyalty.
Wells Fargo quickly turned the page after the fraud scandal to its account holders, however the bank needs to regain its reputation on the market. In addition, management must reorganize some of its secondary activities. The bank, therefore, still has problems to deal with, but according to Morningstar analysts, its fundamentals are solid and promise long-term capital returns of over 10%.