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Bank Stocks in Bargain Bin After Rout

NEW YORK ( TheStreet) -- Following Thursday's market pain -- especially for bank stocks -- investors need to move away from the screaming headlines for a moment and consider that nothing has really changed in two days, and the price action underscores some fantastic opportunities.

Following Warren Buffett's mantra of being "greedy when others are fearful," let's highlight some of the bargains:

Despite the sluggish economy, the lenders with the highest concentration in credit card loans -- including, of course, American Express (AXP - Get Report), Discover Financial Services (DFS) and also Capital One (COF) -- have all done an excellent job working through problem loans, and have been posting fantastic earnings results. That means a healthy generation of excess capital, which will support share prices one way or another. American Express repurchased $1 billion in common shares during the second quarter, and announced another $1 billion buyback plan in July. Those are very significant buybacks for a stock with a $56 billion market capitalization.

While they aren't bank plays, Visa (V) and MasterCard (MA) have also been posting stellar results, and Visa has also planned a $1 billion buyback.

TheStreet on Thursday highlighted 10 large banks with double-digit revenue growth, and several names firing on all cylinders, with organic loan growth, strong deposit growth and improved credit quality.

Many banks with well-supported dividend payouts are looking even more attractive after this week's price drops, and some of the dividend yields are downright juicy, especially when you consider that market rates are still dropping.

One of these is Huntington Bancshares (HBAN - Get Report), which just increased its quarterly payout to 4 cents, which translates to a dividend yield of 2.94% at Thursday's closing price of $5.45. That's a dividend payout ratio of only 25%, based on Huntington's second-quarter earnings of 16 cents a share, and the company reported solid loan growth in key areas, along with very strong deposit growth. While the 2.94% dividend yield may not be the most exciting figure, it sure compares well to a two-year Treasury yield of just 0.257%, at Thursday's close.

Huntington is also cheaply valued to forward earnings, trading for 8.6 times the consensus 2012 earnings estimate of 68 cents a share, among analysts polled by FactSet.

Bank of Hawaii (BOH - Get Report) has an even higher dividend yield of 4.17%, based on a 45-cent quarterly payout and Thursday's closing price of $43.12. The company has been a strong earner all through the credit crisis, although you pay a bit of a premium for the steady performance, as the shares trade for 13 times the 2012 consensus EPS estimate of 74 cents.
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BOH $69.21 0.09%
AXP $71.65 -0.28%
DCOM $18.50 0.00%
HBAN $11.70 -0.51%
JPM $66.87 -0.45%


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