Analysts at Citigroup’s brokerage unit (NYSE: C) said that there are significant risks that U.S. bank stocks face in the immediate term, but in the near future bank stocks could see modest gains give the Federal Reserve’s current policies of accommodation during the modest recover that is occurring.
In a recent report, the bank said, “Since there is above-average risk, we would remain very selective focusing on banks that have strong capital positions, while avoiding banks with the combination of relatively high commercial real estate exposure and questionable capital strength.”
Citigroup recently upgraded BB&T Corp (NYSE: BBT) and Fifth Third Bancorp (NASDAQ:FITBP) to a “buy” rating and kept Bank of America (NYSE: BAC) as its top pick among U.S. Bank Stocks. Citigroup’s analysts also kept their “sell” rating for shares of Zions Bancorp (NASDAQ: ZION). Analysts were up-beat about shares of Suntrust Banks (NYSE: STI), but saw the least value on Regions Financial (NYSE: RF), Zions Bancorp and KeyCorp (NYSE: KEY).
Citigroup analysts estimated that banks said that banks have crossed the 55% mark of the credit cycle, but M&T Bank , Comerica and BB&T have most losses ahead, according to the analysts.
Analysts believe that banks with excess amounts of capital will be key players when the credit cycle is over, giving them a chance to seize opportunities, such as acquiring weaker competitors and benefit from organic loan growth.
