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If you've got to buy a bank, says KBW's Chris Mutascio, make it JPMorgan (JPM) for its relative...

If you've got to buy a bank, says KBW's Chris Mutascio, make it JPMorgan (JPM) for its relative undervaluation, but the banking sector (KBE -1.4%) overall is overvalued. The recent run-up in regional shares (KRE -1.2%) on the belief they stand to benefit most from higher rates is particularly misguided, he says. Banks are far more levered to short rates which haven't budged. Bullet-proof of late, regionals are being sold today: Huntington (HBAN -3.1%), New York Community (NYCB -1.1%), BB&T (BBT -1.1%), PNC Financial (PNC -2.8%), First Niagara (FNFG -2.5%), Synovus (SNV -3.4%), People's (PBCT -1.6%), Comerica (CMA -2.7%), U.S. Bancorp (USB -1%).
Comments (3)
  • For long term investors, I would be buying on the dips. I agree that JPM is a decent buy due to the many different ways they can make money. I hold JPM and WFC. For banks to really increase profits by traditional lending, prime rate must rise. This will happen when the FED raises its --0- interest rate policy. This is going to happen later this year or by mid-year 2014. If the banks can make money in this low rate environment, with fewer mortgage loan origination, stock values should hold around their current levels. If not, they become a buy and hold opportunity.
    10 Jul 2013, 02:27 PM Reply Like
  • One segment of the industry that is far from overvalued is community banks. The best way to get in is through the ETF, QABA. Congress is talking about removing the tax-exempt status of credit unions. If that happens, community bank stocks will soar.
    10 Jul 2013, 05:40 PM Reply Like
  • i would be careful of small community banks. some of these new dodd frank rules could bankrupt them, if for no other reason, they can't afford all of the lawyers to help keep them in compliance. i use community banks for my banking activity. but i won't buy their stock jmho
    11 Jul 2013, 08:23 AM Reply Like
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