Market Overview

Investment Strategy for Banking Stocks in 2010 (FITB, FCNCA, NYB, SNV)


There are a lot of changes expected for the banks in terms of stricter regulatory system, higher capital requirements and increased liquidity requirements. This will adversely affect the banks’ profitability.

Keeping this in mind, the analysts at FBR Capital Markets, Paul J. Miller, Scott Valentin, David Rochester, Bob Ramsey and Brett Scheiner have charted out two major investment strategies for banks in 2010. First is that the analysts have recommended investment in those banks which have lower valuations and lesser exposure to residential loans as real residential loans booked more losses as compared to commercial loans. Commercial loans losses will reduce significantly in 2010 while real estate loans will still continue to pressurize the banks’ balance sheets.

Analysts have favored banks such as Fifth Third Bancorp (NAS: FITB), Huntington Bancshares (NAS: HBAN), Regions Financial Corporation (NYSE: RF) and Zions Bancorporation (NAS: ZION) in line with this strategy. Fifth Third Bancorp, Huntington Bancshares, Regions Financial Corporation and Zions Bancorporation seem to be more profitable in the future.

The second strategy is to focus on banks with FDIC assisted transactions. These transactions reduce the risks and increase low risk cash flow in the banks. Analysts recommend banks such as First Citizens Bancshares (NAS: FCNCA), Nara Bancorp (NAS: NARA), Pac West Bancorp (NAS: PACW), New Alliance Bancshares (NYSE: NAL), New York Bancorp (NAS: NYB) and Washington Federal (NAS: WFSL). First Citizens Bancshares, Nara Bancorp, Pac West Bancorp, New Alliance Bancshares, New York Bancorp and Washington Federal will prove to be less risky and hence recommended. Banks such as Synovus Financial Corp (NYSE: SNV) and Wells Fargo & Co. (NYSE: WFC) have not built on adequate capital and hence remain risky.

Posted-In: Bob Ramsey Brett Scheiner David Rochester FBR Capital Markets Paul Miller Scott ValentinLong Ideas Trading Ideas


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