It’s Hard to Get Excited About Bank Stocks, But We’re Trying
.
Posted by Avi Salzman / Barrons / April 8, 2011
Analysts are feeling ho-hum about bank stocks as first quarter earnings season approaches. And who could blame them? Trading results are expected to be mediocre, the outlook for commercial real estate is getting gloomier and consumers are still loath to add debt. The big catalyst of the past few months has been the return of bank dividends. Sure, no one’s going bankrupt, but no one’s getting rich either (scratch that, a lot of people are getting rich).
And yet, valuations are pretty cheap. Credit quality at big banks has improved, and financial institutions may even get a break on financial reform, as lobbyists have been pretty successful at sweet-talking the new Congress.
So what bank stocks should people be buying?
Sterne Agee analyst Todd Hagerman rates most bank stocks at Neutral, and expects average price appreciation of about 10-15% in the next year. But he particularly likes a few of the larger names, including: JPMorgan Chase (JPM), Citigroup (C) PNC Financial Services (PNC), BB&T (BBT), Fifth Third Bancorp (FITB).
“Inexpensive valuations, potential recovery in capital markets, discounted expectations tied to regulatory reform, and capital redeployment suggest that large cap banks have a chance to show better fundamentals in 2011,” Hagerman wrote. “The credit recovery theme is largely discounted in the valuations and revenue headwinds have subdued multiples since the group’s early 2010 peak.”
Meanwhile, the oil analysts’ down the hall are suddenly tremendously popular. |
