Five Reasons to Steer Clear of Bank Stocks

NEW YORK (TheStreet) -- The largest U.S. banks have had a strong run of late with the SPDR KBW Bank ETF (KBE) roughly doubling in the past year. We've pulled together five reasons to be cautious about their prospects from here.

1) Second Foreclosure Wave:

Roughly five to seven million home owners are technically in default, but have not yet been foreclosed upon, according to a report last week from The Washington Post .

Most of the most worrisome exposure to troubled U.S. mortgages lies with government-sponsored lenders like Fannie Mae (FNM)and Freddie Mac (FNM), according to a report from Oppenheimer & Co. analyst Chris Kotowski, who describes home lending as "the biggest single threat to our generally positive view of the banking industry" in a recent note to clients.

If the fragile economic recovery doesn't cooperate, and it turns out loan losses haven't quite peaked, the usual big bank suspects -- Bank of America (BAC), Citigroup (C), Goldman Sachs (GS), JPMorgan Chase (JPM), Morgan Stanley (MS), and Wells Fargo (WFC) (and the rest of the market) -- could be in for another round of pain.

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