Has the financial sector stabilized—and if so, how can investors put their money to work? Jeffery Harte, managing director in equity research at Sandler O’Neill, and David Trone, managing director at Fox-Pitt, Kelton, discussed their outlook for the banks. (See their stock picks, below.)
“Generally speaking, I don’t think now is a bad time to look at financials because there will be portfolio rebalancing at the beginning of the new year,” Harte told CNBC.
Harte added that overall, the economy needs to drive loan demand before banks can start growing their balance sheets.
In the meantime, Trone said banks are currently able to pick their borrowers and still have a lot of pricing power.
“There’s less competition in the market: you have a lot of banks that are impaired more so than they have been since 1990, so a lot of banks are pulling back on their lending decisions marginally,” he said.
“Banks are very risk-averse and the demand is very low as well. The competition net-net probably is as light as it’s been in about a quarter of a century.”
Recommendations:
Trone Likes:
Wells Fargo
Jefferies
JPMorgan Chase
Harte Likes:
JPMorgan Chase
Citigroup
Bank of America
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Market Point/Counterpoint:
- 3 Financial Stocks May Lead Final Rally: Researcher
- Markets Can Rise 5-10% in 2-4 Months: Strategist
- Prepare For Large Decline In Stocks, Next Year?
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CNBC Data Pages:
- Dow 30 Stocks—In Real Time
- Where's the US Dollar Today?
- Track the Dow Bank Index Here
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CNBC Slideshows:
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Disclosures:
Harte has investment banking clients who own shares of BAC, BK, C, GS, JPM, MS and NTRS.
Sandler O’Neill expects to receive or intends to seek compensation for investment banking services from BAC, BK, NTRS in the next three months.
Sandler O’Neill has received compensation for investment banking services from C, GS, JPM, MS, NTRS in the past 12 months.
FPK or its affiliates may seek compensation for investment banking services from JEF, BAC, WFC, JPM, C during the next three months.
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