The way Warren Buffett talks about U.S. banks these days, you get the impression that he's a major fan of the sector - even if he does have his favourites.
Mr. Buffett co-hosted a program on Bloomberg TV on Friday morning, and Bloomberg helpfully sent out the transcript of what he said on various subjects. But his views on banks stuck out.
On JPMorgan Chase & Co.'s enormous trading loss: "It sounds like a whole lot of money, but it is not that significant relative to JPMorgan…I have had enough mistakes of my own so I am very forgiving."
On Wells Fargo & Co.: "I like Wells Fargo better [than JPMorgan]. We have been buying Wells Fargo month after month for a lot of years. Among the big banks, I think it is the best."
On Bank of America Corp.'s leadership under Brian Moynihan: "Bank of America has a deposit base that is terrific. They got in trouble with a couple of acquisitions, but that was not under Brian's watch. Brian has been doing exactly the things in terms of correcting problems in the past. I think he has done a terrific job. He is getting it back to basic banking."
His enthusiasm does make you wonder if this is an underappreciated area of the market, held back not only by broad concerns about the global economy and the U.S. housing market, but a large number of public relations disasters that have aligned investors with consumers (ie., they're angry).
While the 24-member KBW bank index has shown some life this year, rising 16 per cent, it is down more than 56 per cent over the past five years.
Of course, Mr. Buffett's comments come on a good day for U.S. banks, after JPMorgan triggered a rally with its second quarter results.
The bank said that the trading loss it sustained earlier this year – the same one that sent its share price cratering in May – was far bigger than expected, at $5.8-billion (U.S.).
Yet, the bank still managed to produce enormous net earnings in the second quarter: $5-billion, or $1.21 a share. That is down slightly from last year, but so-called "core" earnings that strip out one-time items were largely in line with analysts' expectations.