Don't Bank on a Bottom

Bargain Hunting

Some say a few of the more troubled banks present a buying opportunity, while others believe investors have already priced any forthcoming bad news into these stocks.

Washington Mutual(WM Quote), Wachovia(WB Quote) and National City(NCC Quote) all were able to arrange $7 billion infusions through private equity investments, stock offerings or both, after reporting first-quarter losses.

Thomas Ruggie, president of Ruggie Wealth Management in Tevares, Fla., says his firm began investing in bank stocks such as BB&T(BBT Quote) and Colonial Bancgroup(CNB Quote), roughly a month ago.

"You have to put your blinders on for two years, you don't know if you're at a low or the low ... You're buying these at a significant discount and regardless of what does pop up, I believe a lot of the concern is already built in," Ruggie says. "I don't think we're through it, but a lot of it is already priced in." Ruggie's firm has approximately $300 million in assets under management through its clients.

The Institutional Risk Analytics note, however, aims to "throw the bucket of ice cold water on the growing crowd of sell side touts encouraging clients to go long U.S. financials."

"...[K]ey sectors of the economy which determine U.S. bank asset quality and revenue -- real estate, home building, consumer spending and credit -- are continuing to sink into the mud," it notes.

Analyst sentiment is definitely mixed about how much credit-, housing-related pain is to come for banks. Seven out of 17 analysts that cover Citi have rated the company at buy. Meanwhile, six out of 19 analysts have buy ratings on Merrill Lynch, according to Bloomberg.