Bank Stocks to Buy Now (Maybe)

This article was originally published March 5.

Investing in financial stocks right now is not for the squeamish, but there are some potential bargains for investors willing to do extra homework on capital strength, asset quality, prospects for securities writedowns during 2009 and dividend yields.

An analysis of the 20 largest U.S. bank and thrift holding companies by market capitalization shows how far the mighty -- like Citigroup (C) and Bank of America (BAC) -- have fallen, but also uncovers some lesser-known players -- like Hudson City Bancorp (HCBK) and Capitol Federal Financial (CFFN) -- who have weathered the storm relatively well.

It might be a surprise to see some of these names among the 20 largest publicly traded U.S. bank and thrift holding companies by market capitalization. But the weight of the credit crisis has rearranged the list by eliminating large companies through failures like Washington Mutual, and acquisitions like National City and Wachovia.

Many of the companies that have moved up the rankings exhibit similar qualities: Attractive, safe yields, low ratios of nonperforming loans and debit securities to core capital and loan loss reserves and limited loan losses during 2008.

Before the financial crisis began, many investors were of the opinion that, for a healthy bank or thrift holding company, a price-to-book ratio below 2 was attractive. The events of the past year and a half have put book values under suspicion, but the ratio can still come in handy when considering investing in some of the healthier companies on the list.

Below is a list of the 20 largest U.S. holding companies by market capitalization:

Largest 20 Publicly Traded U.S. Bank and Thrift Holding Companies by Market Capitalization - March 3, 2008 ($Bil) Bloomberg, Highline Financial.

Since gathering the data is never as cut-and-dry as we would like, here are a couple of points that need to be made about the table:

Capital infusions received from the Treasury through the Troubled Assets Relief Program (TARP) during the first quarter of 2009 are not included. This is very important when considering the capital exposure to troubled assets for a company like Bank of America, which received $10 billion in TARP money after the acquisition of Merrill Lynch, followed another $20 billion.