Three of the nation's five largest banks are trading at multiples below 12 and yielding over 4% to boot. The desire to avoid any exposure to the mortgage market is resulting in the best names in the industry being available at bargain basement prices. As smaller or less diversified institutions are forced to sell off assets into a depressed market, Citigroup (NYSE:C), Wachovia (NASDAQ:WB) and Bank of America (NYSE:BAC) are all well positioned to scoop up those securities. BofA's recent injection of $2B into Countrywide (CFC) at very favorable terms demonstrates the types of deals available to these behemoths in this environment.
I've previously written on Citigroup's A+ S&P Quality ranking and it's 4.5% yield. Bank of America is just one notch down the quality ladder at an A grade with Wachovia trailing at a still very respectable A-. All three possess 5 star ratings from S&P and distinctly positive analyst support across the street.
Strong quality rating banks with low multiples, high yields and well positioned to take advantage of the rough market conditions that are floundering much of the competition. As credit markets recover I believe these three giants of the industry will experience multiple expansion and capital appreciation in addition to the lucrative dividends they currently pay investors.