Contagion fears and regulatory reform uncertainties have created a difficult climate for financial stocks. But Betsy Graseck, large cap bank analyst at Morgan Stanley, and Moshe Orenbuch, research analyst and managing director at Credit Suisse, told investors that there are still some attractive names in the sector.
“This is a group that over time can generate 13 to 14 percent,” Graseck told CNBC.
“If you have the patience for a 1 to 2 year view, you can make some money on these stocks.”
Graseck advised investors looking to get into the sector to “layer into the stocks” over time.
Her top picks include Bank of America , JPMorgan and Wells Fargo .
Graseck addressed the financial regulation bill:
“We have several different pieces we’re concerned about, which is how they deal with the derivatives side of the business,” she said.
“The more likely case is that you are going to be able to continue to do derivatives, but with a little more oversight, a little less profit margin and capital.”
In the meantime, Orenbuch said he expects to see "low to mid-double digit returns" in the major banks such as JPMorgan and Bank of America by 2011, bolstered by strong reserves that both companies have.
“The credit card effects are something that will be felt for a couple of years, but the near-term’s bolstered by the fact that there’s significant amounts of reserves, and they can grow through some of the issues.”
Scorecard — What They Said:
- Graseck's Previous Appearance on CNBC (Oct. 8, 2009)
- Orenbuch's Previous Appearance on CNBC (Apr. 19, 2010)
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Other Banks:
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Citigroup
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Disclosures:
Orenbuch does not own shares of BAC or JPM.
Graseck’s firm Morgan Stanley owns shares and has investment banking clients who own shares of JPM, BAC, AXP, WFC and COF.
Morgan Stanley has either provided or is providing non-investment banking, securities-related services to JPM, BAC and AXP. Morgan Stanley makes a market in securities of JPM, BAC, AXP, WFC and COF.
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