MOST READ: Best Banks Not Best Buys

Looking at the third table, the multiples on the first three look quite high, especially for this market. While FirstMerit, Cullen/Frost and Commerce of Kansas City have fared well so far, having avoided high concentrations in residential and construction lending, it's hard to expect significant earnings growth in this environment, especially when considering that we're still early in the recession cycle.

The price-to-earnings and price-to-book multiples for International Bancshares of Laredo, Texas are more attractive. However, while the holding company's earnings held up through the third quarter, nonperforming residential and construction loans have been ticking upward over the past three quarters. Charge-off activity remained low through the third quarter, but can be expected to increase over the coming quarters, since the company reported $86.8 million in nonaccrual loans as of Sept. 30, up from $46.2 million the previous quarter. Net charge-offs for the first three quarters totaled just $5.5 million, while the company's provision for loan losses was $12.7 million. The company's strong overall asset quality has enabled it to maintain good earnings performance so far, but any significant increase in charge-offs will necessitate a large provision for loan losses, which will severely cut into earnings.

Be Careful

In conclusion, this is a very difficult environment to consider investing even in the holding companies whose earnings have held up the best. Many of the strongest holding companies stock prices look quite expensive, with price-to-book ratios approaching or exceeding 2, and P/E ratios of 14 or higher.

The ones that appear cheap have major exposure in their securities portfolios, like State Street, or potential for significant increases in net charge-offs. Even the ones with stellar reputations and attractive dividend yields, such as Wells Fargo (WFC Quote) and US Bancorp (USB Quote) look quite pricey, and Wells Fargo faces the prospect of cutting that 5.29% dividend, in the event that the integration of Wachovia (WB Quote) leads to greater-than-expected losses.

Plus, as we just saw with Citigroup on Monday, some holding companies could be headed for a second helping from the Treasury trough, forcing them to suspend dividends on common shares.