Chill Pill for Long-Term Bank Stock Investors

NEW YORK ( TheStreet) -- Time to look in the mirror and consider what kind of investor you are.

The financial media are geared toward a day-trading viewpoint, with a constant stream of headlines to magnify any piece of information, big or small, into an earth-shattering event. That's pretty useless for long-term investors.

The fact of the matter is that nothing happened last week. The employment numbers didn't tell us anything we didn't already know. The economy is growing at a slow rate. A discredited ratings agency (Remember those triple-A ratings that they were paid to assign to some iffy mortgage-backed paper and the triple-A ratings for the insurers of those securities?) lowered its rating for U.S. debt.

Federal bank regulators quickly issued guidance to the industry that risk-based capital requirements would be unaffected by the rating downgrade.

If you are a long-term investor, consider just how much money you could have made if you went in during a time of maximum fear and had the guts to stay in.

KBW Bank Index ( I:BKX) hit its credit-crisis day-end bottom on March 6, 2009, closing at 18.62. On that day, JPMorgan Chase ( JPM) closed at $15.93. Even after last week's nastiness -- with JPM pulling back 7% -- the shares closed at $37.60 on Friday. Although nobody times the market perfectly, the shares more than doubled in less than two and a half years.

A bet on the U.S. banking industry during the same period also would have turned out quite well, with the KBW Bank Index closing at 41.42 Friday.

Bank of America ( BAC) -- with the biggest regulatory target on its back and an $8.8 billion second-quarter loss -- returned 162% over the same period, through Friday's close at $8.17.

And we're not where we were in March 2009. Despite the slow growth rate, the economy is growing, and payrolls are increasing. Nearly all of the large banks have repaid government bailout funds and worked through a ton of problem loans, and JPMorgan is trading for just 1.2 times its tangible book value of $31.52, according to SNL Financial.

That's a very cheap valuation for a company that has been profitable every quarter for the past seven years.

Here's more food for thought, for long-term investors in danger of getting caught up in the headlines.

Shares of Citigroup ( C) closed at $33.44 Friday, pulling back 26% since the stock underwent a 1-for-10 reverse split on March 6. Ouch. Then again Citigroup's shares are downright juicy, considering that they trade for just 0.7 times their tangible book value, according to SNL.

Citigroup is profitable and continuing to slim down, through CEO Vikram Pandit's "good bank/bad bank" strategy, and the company is unique among the largest U.S. banks in that it is turning into a play on growth in emerging markets.

According to second-quarter GAAP data supplied by SNL, 63% of Citigroup's total deposits were gathered outside the U.S., 37% of the company's loans were originated outside the U.S. and the company reported a 12% year-over-year increase in second-quarter international consumer banking revenues.

Of course, the facts won't get in the way of a market panic. If you're holding long-term positions in the largest U.S. banks, you've already taken a drubbing over the past couple of weeks. Try not to let the headlines guide your decisions and consider adding to positions at bargain prices.

If you're on the sidelines, maybe the current panic is just what the doctor ordered. You can consider a slow buildup of shares in a name that you believe in, considering that the worst of the credit mess seems to be behind many of the largest banking names.

For Bank of America, investors are likely to see some more headlines as the company seeks to move past mortgage-related pressures. For JPMorgan and Citigroup, the sailing is likely to be much smoother.

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

More from Opinion

Red Hat CFO Tells TheStreet: Tech Trends Are Still in Our Favor

Red Hat CFO Tells TheStreet: Tech Trends Are Still in Our Favor

Throwback Thursday: Intel Edition

Throwback Thursday: Intel Edition

Intel's Next CEO Should Try Harder to Protect Its Flanks Against AMD and Others

Intel's Next CEO Should Try Harder to Protect Its Flanks Against AMD and Others

3 Warren Buffett Stock Picks That Could Be Perfect for Your Retirement Portfolio

3 Warren Buffett Stock Picks That Could Be Perfect for Your Retirement Portfolio

Wednesday Wrap-Up: GE and Facebook

Wednesday Wrap-Up: GE and Facebook