Banking on quality

Article Excerpt

The Securities and Exchange Commission (SEC) has accused broker Goldman Sachs of misleading investors about the risks of investing in certain mortgage-backed securities. Fears that the SEC will launch similar lawsuits have hurt the stock prices of most major U.S. banks. As well, Congress may pass new laws aimed at preventing another financial crisis. These reforms could force banks to raise more capital to cover bad loans, or sell some of their businesses. Despite the uncertainty, we still like the long-term prospects of these two high-quality banks: J.P. MORGAN CHASE & CO. $44 (New York symbol JPM; Income Portfolio, Finance sector; Shares outstanding: 4.0 billion; Market cap: $176.0 billion; Price-to-sales ratio: 1.8; Dividend yield: 0.5%; WSSF Rating: Average) gets most of its earnings from securities trading, which leaves it vulnerable to new regulations. However, its loan losses are improving. J.P. Morgan Chase is a hold. WELLS FARGO & CO. $33 (New York symbol WFC; Conservative Growth Portfolio, Finance sector; Shares outstanding: 5.2 billion; Market cap:…