This may be the time to be brave and buy stocks in banks, as the steep fall in share prices in the past six months has created opportunities to scoop up cheap stocks, analysts said on Monday.
But investors should still choose carefully from within the sector, as the list of casualties of the subprime fallout is not yet complete, they warned.
Banks that are unaffected by the U.S. financial sector meltdown, with a private banking division and with active expansion plans, are the safest bet, David Costa, dean of Robert Kennedy College, told CNBC.
Swiss banks Julius Baer and Banque Cantonale, along with Verwaltungs & Privat Bank in Lichtenstein, are just three of the financials with a positive outlook for 2008, according to Costa.
“The big characteristic that they all share is that they are all very strong in private banking," he said. "And as we have seen last year, private banking increase has been over 100% in asset and management.”
These banks are also expanding fast. Julius Baer has just opened an office in Abu Dabi in the United Arab Emirates while Verwaltungs & Privat Bank was recently authorized to operate in Hong Kong and Singapore.
Growth is likely to continue in the private banking sector in the coming months and some of the strongest investment opportunities are in the emerging markets, Costa said.
“It seems they are much, much concentrating on private banking. I would see private banking going stronger this year,” Costa said. “There are also some very good opportunities with Japanese banks.”
Expansion in Central and Eastern Europe, with their fast-growing financial intermediation, is also favorable for banks, other analysts said.
Most banks that invested in the region did not have a lot of exposure to the financial innovations that were part of the trouble when the subprime mortgages system collapsed, they stressed.
Austrian banks such as Erste Bank and Raiffeisen International, Italian ones such as UniCredit and French banks like Societe Generale have a strong presence in Eastern Europe.