Date updated:01-10-2009
While the economy's in for more pain, some banks' balance sheets are sound. Shares worth a look include trust banks, depressed regionals and broad-based ETF.

-
NTRS
Northern Trust Co - $47.24
- -0.90%
- $47.54
Even against that tough backdrop, some banking stocks could do well. Trust and processing banks like Northern Trust (NTRS) and State Street (STT) have little credit exposure and trade at historically modest valuations. Northern Trust, at 52, fetches 13 times projected '09 profits, while State Street, at 43, trades at nine times estimated '09 earnings. Goldman Sachs just added Northern Trust to its Conviction Buy list, noting it has the "cleanest balance sheet" among the trust banks and a strong capital ratio. Goldman analyst Brian Foran's target is 64.

-
STT
State Street Cp - $40.80
- -2.13%
- $41.44
Even against that tough backdrop, some banking stocks could do well. Trust and processing banks like Northern Trust (NTRS) and State Street (STT) have little credit exposure and trade at historically modest valuations. Northern Trust, at 52, fetches 13 times projected '09 profits, while State Street, at 43, trades at nine times estimated '09 earnings. Goldman Sachs just added Northern Trust to its Conviction Buy list, noting it has the "cleanest balance sheet" among the trust banks and a strong capital ratio. Goldman analyst Brian Foran's target is 64.

-
PNC
P N C Fin Svcs Gr - $54.84
- -0.72%
- $54.78
PNC Financial (PNC), based in Pittsburgh, has a stronger-than-average balance sheet and a valuable stake in New York investment manager BlackRock (BLK) worth 25% of its stock-market capitalization. PNC also struck what many view as a very attractive purchase of National City in late 2008. "I think PNC got a steal in the National City deal and that it will be significantly accretive to earnings," St. Pierre says. National City was hurt by exposure to subprime and home-equity lending, but PNC is assuming such draconian losses on the National City portfolio that it probably will do very well from the deal. At 49, it trades at 12 times projected 2009 profits. St. Pierre has a price target of 76.

-
JPM
Jp Morgan Chase C - $42.46
- -0.21%
- $42.47
JPMorgan's shares have fallen to 27 from a high of 50 in October, when investors figured that the bank, under its widely admired CEO, would emerge as a big winner from the credit mess. Since then, it's become clear that JPMorgan isn't immune to credit-card and mortgage woes. Its allure is that it now trades at a small premium to its tangible book value of $23 a share, and just seven times estimated 2010 net. Estimates have been falling for 2009, however; Bernstein now sees the company making $1.80 a share.

-
KBE
Spdr Kbw Bank Etf - $21.66
- -0.23%
- $21.67
Bank bulls can buy the exchange-traded fund SPDR KBW Bank ETF (KBE) based on the KBW index -- now trading around $20, or less than half its '08 high. Its top weightings are in Wells Fargo (WFC), JPMorgan, Bank of America (BAC) andUS Bancorp (USB). They account for 30% of the index.

-
CMA
Comerica Inc - $27.91
- -0.57%
- $27.93
St. Pierre likes Comerica, whose shares, at a recent 19, are trading at under 60% of tangible book value, one of the group's lowest valuations.

-
KEY
Keycorp - $5.73
- -1.55%
- $5.77
Cleveland-based KeyCorp trades for under $9, and fetches just 70% of tangible book value of $13. Goldman analyst Foran argues that while KeyCorp may operate at just break-even this year, its ratio of tangible equity to assets is a strong 6%. "Absent large losses, we think the stock can trade back toward tangible book," he wrote.

-
STI
Suntrust Banks - $22.04
- +0.82%
- $21.67
Many investors don't realize that some "weak" regional banks, including Suntrust (STI), KeyCorp and Regions Financial (RF), look stronger than some major institutions, based on tangible common equity to tangible assets, a conservative capital ratio. These regionals have 6% tangible capital to assets, while Wells Fargo's ratio is near 3%, US Bancorp's is 4% and BB&T's is 5%.
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