Two Winning Bank Stocks: U.S. Bancorp and BB&T Corp.

Over the last year, the financial industry has taken a beating. Many banks have failed while others have taken drastic measures to preserve their futures. The markets have recognized this turmoil and punished bank stocks. Historically, financials are some of the most consistent and highest yielding stocks. As such, they are a cornerstone of most dividend/income portfolios. In my personal portfolio, I held six bank stocks at the beginning of the year. Year-to-date through October 31, I had earned positive returns on two of them:

1. BB&T Corporation (BBT) - October YTD Return 19.7%

BB&T Corp has a large presence in its home state of North Carolina, as well as in Virginia, with additional offices in Georgia, South Carolina, the District of Columbia, and seven other states. The company exhibits strong credit quality of its loan portfolio, high net interest margin, high loan loss reserves and a long history of profitability.

Yield: 6.10%
Last Dividend Increase: August 2008 ($0.46 to $0.47)
Buy Below Price: $35.79
Current Price: $30.81
Last Reviewed: 6/23/08

Since the end of October the market has continued to exhibit a high degree of volatility. As of November 10, 2008 only BBT remains in positive return territory. Be sure of one thing, there will be winners that emerge at the end of this financial crisis. There is also a great deal of risk associated with financials, so do your homework before making any buy/sell decisions.

2. U.S. Bancorp (USB) - October YTD Return 0.8%

U.S. Bancorp was formed through the February 2001 merger of Minneapolis-based U.S. Bancorp and Milwaukee-based Firstar Corp. With almost 2,500 branches throughout the U.S., we view USB as well diversified geographically. In many of the areas it competes in, USB has a strong market share. Its low-cost model, geographic and product diversity, large existing customer base, and scale give it a competitive advantage over many of its peers.

Yield: 6.18%
Last Dividend Increase: January 2008 ($0.40 to $0.425)
Buy Below Price: $24.52
Current Price: $27.51
Last Reviewed: 12/27/07

Disclosure: Long USB and BBT.

Comments

[funfun:]

A large component of BB & T is First Virginia Banks, which up to the time it was acquired and subsumed by BB & T, was one of the absolutely best managed conservative banks in the country. ...funfun..

2008 Nov 12 08:23 AM

[helplessobs...:]

As a long time holder of BBT I can attest to the quality of this banking operation. In the sub prime mania when Stafford County, Va houses appreciated 30% in one year, I stopped by a local branch to see what their home loan policy was. The loan officer said 20% down or PMI. Like all banks they have some troubled real estate(land) and construction loans, but their balance sheet can easily absorb them.

2008 Nov 13 10:54 AM

[helplessobs...:]

As a long time holder of BBT I can attest to the quality of this banking operation. In the sub prime mania when Stafford County, Va houses appreciated 30% in one year, I stopped by a local branch to see what their home loan policy was. The loan officer said 20% down or PMI. Like all banks they have some troubled real estate(land) and construction loans, but their balance sheet can easily absorb them.

2008 Nov 13 10:54 AM

[_vagrant_joe:]

I've been a business banking customer of US Bank for a few years now. They still have problems with their internet banking, seem to consistently have trouble with wire transfers (both domestic & international), are a hit or miss as far as employees go -but their saving grace seems to be the appearance of stability during this banking mess. However, they recently took $4 Billion from the Fed under the TARP program -which indicates anything but stability. So far, I have seen no disclosure as to what sort of dilution this will cause to shareholders -or what sort of restrictions the Federal Governments additional involvement will place on their business operations. If they were as financially sound as they claim to be, they would not have a need to participate in the bailout.

2008 Nov 19 03:31 PM

[_vagrant_joe:]

I've been a business banking customer of US Bank for a few years now. They still have problems with their internet banking, seem to consistently have trouble with wire transfers (both domestic & international), are a hit or miss as far as employees go -but their saving grace seems to be the appearance of stability during this banking mess. However, they recently took $4 Billion from the Fed under the TARP program -which indicates anything but stability. So far, I have seen no disclosure as to what sort of dilution this will cause to shareholders -or what sort of restrictions the Federal Governments additional involvement will place on their business operations. If they were as financially sound as they claim to be, they would not have a need to participate in the bailout.

2008 Nov 19 03:32 PM