Buy Bank Stocks Without the Baggage
Americans have come to hate banks, especially the ones too big to fail. If you can’t bring yourself to invest in that group, there are plenty of small regional banks that offer similar growth and pay hefty dividends.
It’s hard to question Americans’ distaste for those big institutions after the mortgage-backed securities debacle in 2008 when so many homeowners suffered and many offending banks walked or were bailed out by the government.
That fallout still goes on. In recent weeks, the Federal Housing Finance Agency (FHFA) announced a $5.1 billion settlement between JPMorgan Chase (JPM), Fannie Mae and Freddie Mac. Also involved in the private lawsuit were Bear Stearns and Washington Mutual, two of JPMorgan Chase’s acquisitions. Citigroup (C) and Deutsche Bank (DB) were also accused and settled right away, costing them $158 million $202 million, respectively.
Despite the bad karma of recent years, many large commercial banks are doing quite well in 2013: JP Morgan Chase, Citigroup and Wells Fargo shares are up 17.9%, 21.5% and 22.2% respectively year to date.
But savvy investors who just can’t stomach the big institutions will find plenty of investing opportunities in regional and small banks — let’s call them “the small and the scrupulous.” With all the right attributes and none of the baggage of the big boys, are three top candidates to consider: