Earnings season is just around the corner for the troubled financial sector, so how does a top stock researcher rate the sector?
"Unfortunately, I think we've still got a lot of credit headwinds, not only on the consumer side, but building on the commercial side," Jeffery Harte told CNBC.
The managing director of equity research at Sandler O'Neill added, "They're going to make it a tough time to be in financials for at least another quarter or two."
But, he says, that doesn't mean investors should stay completely out of the sector.
"Certainly, the financial stocks are not expensive," Harte said. "There's been a lot of bad news and bad things that have happened. It's probably time to start dipping your toes in the water, though I would warn people...there's probably sharks in that water."
He thinks the downside has played itself out, but it will still be a while before investors see an upside.
Harte has a "buy" on JPMorgan Chase, but "holds" on Bank of America
and Citigroup, and he has lowered his ratings on Lehman Brothers and Morgan Stanley.
"I think there's some thought out there that you want to be early, and it's time to get in," he said, but added, "I think people are underestimating the magnitude of the credit headwinds we have."
JPMorgan Chase, Bank of America, and Citigroup are all investment banking clients of Sandler O'Neill, and Lehman Brothers has compensated Sandler O'Neill for providing products or services other than investment banking.