Not All Bank Stocks are Subprime Bank Stock Disasters

The news has been full of stories regarding the debacles of banks which dealt heavily in the subprime lending markets. Notably, the stocks of Countrywide Financial (-67.9% YTD), IndyMac Bancorp (-79.4% YTD), and Washington Mutual (-51.8% YTD) have garnered a lot of attention. While these stocks may be attractive to speculators who basement hunting, there are still unanswered questions regarding their loan portfolios. The companies themselves are in disaster-mode having slashed jobs, dividends, and been forced to increase deposit rates to increase their base. Lost in the shuffle is the large amount of banks which have no exposure whatsoever to the subprime mess, but whose stocks are suffering none-the-less. Banks which only make loans to well-qualified buyers or who earn revenue through processing, trust business, brokerage, cash management, corporate lending, among other sources. An investor can go to a site like Yahoo Finance or Morningstar and filter banks stocks for stocks which pay dividends over 5%, have growing earnings, and a current price-to-earnings ratio below 20 and find a long list of local and regional banks which meet these criteria. So while most of us do not have the speculative nature to take a shot at stock down 80%, perhaps a bank stock paying investors 5% with positive growth potential deserves a look. A partial list of bank stocks is listed here.

Note: Bank deposits are insured by the FDIC up to $100,000. Investors can lose principal by investing in bank stocks.