Pros Can’t Agree On Whether Banks Are a Buy

Tuesday, 18 Dec 2012 | 7:14 PM ET

Financials gained after widely-followed bank analyst Meredith Whitney on Tuesday turned bullish on the sector and upgraded Bank of America, Citigroup and Discover Financial to "buy" from "hold," but it seems there still is some disagreement among traders as to whether bank stocks are worth buying now.

Bank of America
David Paul Morris | Bloomberg | Getty Images
Bank of America

"There's an incredible growth opportunity within the financials, particularly Bank of America, Citigroup, Discover Financial — and there are others," Whitney told "Closing Bell." "I think the underlying support is housing is close to bottom, so that is a great headwind relief for banks ... They've come a long way."

Speaking on CNBC's "Fast Money," trader Karen Finerman of Metropolitan Capital Advisors said there are several reasons to be bullish on Bank of America. An Improving real estate market, Increased consumer spending, a rising interest rate environment and declining litigation costs will all help the Charlotte, N.C.-based bank, she said.

Finerman also noted its stock also trades at a "significant discount" to its book value, which is the total value of the company's assets that shareholders would theoretically receive if a company were liquidated. Its stock is relatively cheap given its price-to-earnings ratio, too, judging on where the stock "could go." The P/E ratio, by the way, is a valuation ratio of a company's current share price compared to its per-share earnings.

To Finerman, the only downside to the stock is that it's up 104 percent year-to-date, but she still thinks "there's room to run in Bank of America."

Bank of America: More Room to Run?
Shares of Bank of America are up more than 104 percent year-to-date, and the Fast Money traders offer strategies to playing the stock now.

Guy Adami, on the other hand, remains concerned about Bank of America's inventory of delinquent mortgages.

"If they turn into foreclosures, which I think they will, I don't think that augers particularly well for BAC," said Adami, managing director of stockMONSTER.com, adding its European market continues to struggle and at some point, investors will likely demand it raise its "paltry" dividend. "You have to be a little leery that there may be some bogeys out there that we don't talk about enough."

Adami pointed out that BAC has been a particularly volatile stock, too.

"I'm not saying it can't go to $12 or $12.50 at some point," Adami explained. "But it wouldn't surprise me again if we saw a $9.50 or $10 handle at some point again, as well."

When this story was published, Finerman owned Bank of America.

  Price   Change %Change


Contact Fast Money

  • Showtimes

    Halftime Report - Weekdays 12p ET
    Fast Money - Weekdays 5p ET
  • Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

  • Scott Wapner is host of the "Fast Money Halftime Report," which airs weekdays from 12 p.m. to 1 p.m. ET.

  • Guy Adami is a contributor on CNBC's "Fast Money." He also is managing director of stockMONSTER.com.

  • Najarian, the "Pit Boss," is cofounder of optionMONSTER.com, a news site for options traders.

  • Finerman is president of Metropolitan Capital Advisors, Inc., a company she co-founded.

  • Founder of EmergingMoney.com

  • Chief Market Strategist for Virtus Investment Partners & CNBC Contributor

Halftime Report