The collapse of Lehman Brothers two year ago (Sept. 15, 2008) put a hard hit to financial industry, many banks have collapsed, some mergered, and with the enormous help from government, some banks gain their power to stand on their own feet. The government, of course, launched a new regulation on bank capital to prevent the future “Lehman Brothers\’ tragedy”. Although this regulation ensures a better bank\’s capability to absorb loss in future, it also causes small and medium banks some challenge in future profitability.
In the time of bank recovery, if you are still interested in investing in financial market, consider 5 stocks below, which were chosen from dozen by the top fund managers.
Lying on the “Boulevard of Fame”, known as “the bank of the stars,” City National Bank of Beverly Hill serves the most wealthy and luxury purchasing clients. A wealthy customer base, with more than $ 18 billion in deposits, an extraordinary 92% of which are from customers owning non-interest-bearing accounts. This helps companies get no big trouble to pay back the $ 400 million it received in government bailout funds, and takes over three failed banks in the previous year.
The current price of City National Bank is quite undervalued, but it\’s expected that it will claim back the value and rise up to $ 71 a share in the next two years.
Total deposits: $ 18 billion
52-week range: $ 36.43 – $ 64.30
Bank of American
On the day Lehman Brothers declared bankruptcy, Bank of America\’s shares lost more than 21% its value. Since then, the stock had recovered slightly before it got another hit when there was announcement that Durbin Amendment would impact fees that the bank collected from debit card swipes. The market went down so badly that now the stock of Bank of American was considered super-undervalue.
However, the fund managers did not think the negative impact of the new regulations on the bank profit and activities could harm the bank expected earning. They also realized that the BOA could reduce the impact by fees assessed on other product lines and additional cost-cutting measures. The price right now is so low that it is likely to head higher.
Fund Managers expected the price would rise up to $ 21 per share in next few year, when credit market back to normal condition.
Total deposits: $ 1 trillion
52-week range: $ 12.18 – $ 19.86
Thirteen months after the hit, Well Fargo shares started to recover a little bit, but still be sold at lower price than it actual value. Although Wells Fargo owned many positive attributes, the stock held none of them. However, fund managers believed that with the wide range of financial products, healthy profit margins and a diverse geographic base, Wells Fargo would be rapidly back to its track with strong profit offering to stock holders.
Fund Managers predicted that the stock would surge almost 50% as the credit market improved.
Total deposits: $ 817 billion
52-week range: $ 23.02 – $ 34.25
Over a few years, despite of the recession, the US Bank (owned by US Bancorp) has been able to maintain a high level of profitibility. Although the recent regulation made US Bancorp shown some hesitation in announcing the plan of increasing dividend, investors are really confident that the bank will be one of the first to reward shareholders with a improved payout.
Investors believed that under the release of new goverment rule on capital requirement, the bank would soon raise its dividend payout from the current 5 cent per share.
Total deposits: $ 191 billion
52-week range: $ 20.44 – $ 28.43
Since the recession doesnot hit Texas heavily as other states, Cullen/Frost Bank becomes one of the banks that happily refused bailout money from Washington. The Bank management board decided to keep it away from the goverment, which turned out to be good news to shareholders. The bank can still pay out dividends to shareholders at yield of 3.5% annually and also announce to increase the pay-out ratio in the next few year.
Cullen/Frost bank is favored by fund managers because of its large capital and clean balance sheets
Total deposits: $ 14 billion
52-week range: $ 45.67 – $ 60.78
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