'Mad Money' Spotlight: Banking Sector Buys

For the past few weeks, words like "zombie" and "stress" have buzzed around the banking industry. But the bank stress tests done, Jim Cramer chose last night's "Mad Money" to unveil his list of banks to watch -- and one to avoid -- in the coming weeks.

Cramer said that two of the biggest names -- Goldman Sachs(GS Quote) and JPMorgan Chase(JPM Quote) -- are still the strongest. Goldman dropped in afternoon trading, coming in at $142.92 and 26 cents below yesterday's close. JPMorgan Chase was down 52 cents at $36.75.

Much of today's action on Goldman came after reports that the company reached out for permission from the Federal Reserve to repay its obligation under the Troubled Asset Relief Program. JPMorgan Chase held its shareholders meeting today.

For those looking beyond the expensive big boys for more potential upside, Cramer pointed to three others: State Street(STT Quote), a custodial bank Cramer said has little exposure to the overall economy, was on a 3.6 percent upswing since yesterday. That came after news that both Credit Suisse and RBC Capital Markets upgraded the stock today. Of the three, Cramer said State Street had the most upside.

The second, BB&T(BBT Quote), was clinging in the positive range, up 3 cents to $22.65 from yesterday's close.

The third, U.S. Bancorp(USB Quote), was down 1.5% since the previous close. Cramer likes the bank, saying it raised $2.5 billion in recent capital. Yet it remains a speculative play because of risks from future foreclosures.

Cramer's one bearish call in banking was Capital One(COF Quote), a bank he says will be affected by looming credit-card legislation. The stock was down 3.3% for the day. Following a move by the House of Representatives, the Senate passed a version of a bill today putting more restrictions on credit card companies. Democrats are trying to get a final version of the bill on President Obama's desk by Memorial Day. The bill passed today would change universal default rules and require 45 days notice of interest rate increases, among other things.