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The outlook for U.S. Banks is very murky due to the moribund housing market, an onslaught of litigation and increased legislation and regulation. The situation up north is more advantageous given a commodity driven economy and a banking system that was not brought low by a housing bubble. Two banking stocks that yield close to 5% worth considering are Bank of Montreal and Royal Bank of Canada.

Bank of Montreal (NYSE:BMO) – “Bank of Montreal, together with its subsidiaries, provides a range of retail banking, wealth management, and investment banking products and solutions in North America and internationally. It offers personal banking products and services to consumers and small businesses, including deposit and investment services, mortgages, consumer credit, small business lending, and other banking services; and commercial banking products and services to small business, medium-sized enterprise, and mid-market banking clients comprising lending, deposits, treasury management, and risk management services”. (Business Description from Yahoo Finance)

4 reasons Bank of Montreal is a solid value at $57 a share:

1. Bank of Montreal sells a very reasonable five year projected PEG of 1.14 and yields a robust 4.9%.

2. It has beat earnings estimates for the last four quarters and is selling at just 11 time earnings.

3. Unemployment is just 7% in Canada and business confidence is must higher than in the United States, which bodes well for loan growth.

4. The stock is still selling under analysts’ price targets. The median analysts’ price target on BMO is $67.

Royal Bank of Canada (NYSE:RY) – “Royal Bank of Canada provides personal and commercial banking, wealth management services, insurance, corpo’rate and investment banking, and transaction processing services under the RBC name worldwide". (Business Description from Yahoo Finance)

1. Royal Bank yields 4.8% and has grown its dividend payout at over 4% a year over the past five years.

2. RY looks like it is starting to build a technical base at just under $45 which is close to its 52 week low (See Chart, click to enlarge):

3. The stock is under analysts’ price targets. The median analysts’ price target on RY is $57 and S&P has a price target of $60 on Royal Bank of Canada.

4. RY has an AA- rated balance sheet and is projected to grow earnings at a 12% clip annually over the next three years by Standard & Poors.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in RY over the next 72 hours.