Bank selling is 'ridiculous'—time to buy: Trader

Has the deep dive in bank stocks finally made these names attractive enough to buy?

Banks have been beleaguered this year by concerns over continued low interest rates and exposure to energy loans. The S&P 500 financial sector has been the worst performer of 2016, down more than 17 percent year to date.

However, David Seaburg, head of sales trading at Cowen and Co., said the tumble has created a good buying opportunity for investors looking to bet on the banks.

"The selling pressure on these has been ridiculous," Seaburg said Thursday on CNBC's "Trading Nation." "I'm shocked to see [Bank of America] trading here" at $11.

Within the financial sector, bank names have fallen 23 percent this year. As stocks dropped 1 percent on Thursday, banks saw even more pain, falling more than 4 percent even as major lenders have traded below their tangible book value.

Read MoreEurope banking meltdown: Why it's gone 'overboard'

"During periods of extreme negativity, you see complete dislocation in different sectors," Seaburg said. "I'd start to look to buy some of these on weakness."

Piling on to bank troubles is political risk, said Nicholas Colas of Convergex. Such a risk factor has been difficult for investors to value, he added.

Presidential front-runners from both the Republican and Democratic parties have publicly criticized Wall Street banks. "It is time to break up the largest financial institutions in the country," reads Bernie Sanders' Web page on Wall Street reform. Ted Cruz has said large financial institutions are "in bed with big government," and Donald Trump has said hedge funds can "get away with murder."

"Somehow the banks on Wall Street have replaced the health-care sector as the No. 1 punching bag during this presidential campaign," Colas said Thursday on "Trading Nation."

Read More Wall Street's nightmare candidates leading race

A flattening yield curve has also added to the uncertainty surrounding banks, Colas pointed out. The spread between the 10-year Treasury note and the two-year Treasury note has dipped to its lowest levels since 2008. As long-term rates have fallen and short-term rates stay low, banks will face mounting pressure on net interest margins.

Despite these challenges, Colas agrees that the banks have been oversold this year.

"It's a value trade, but it's a tough trade," he said.

Want to be a part of the Trading Nation? If you'd like to call into our live Wednesday show, email your name, number and a question to


Trades to Watch

Trader Bios


Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

Read more