Small banks are enticing as the recovery goes on
Dear Mr. Berko:
I have $40,000 that I want to gamble in bank stocks, because I think Bank of America, Citigroup, Wells Fargo and JPMorgan Chase can double in price during the next two years. I’d invest $10,000 in each. Do you have any other recommendations and do you approve of this idea?
M.R., Jonesboro, Ark.
Dear M.R.:
You’ve got to be dumber than paint to buy Citigroup Inc. (C-$4.19), Bank of America Corp. (BAC-$11.52), JPMorgan Chase & Co. (JPM-$37.72) or Wells Fargo & Co. (WFC-$26.46). These huge money center banks aided and abetted the near collapse of the U.S. economy. They fostered the collapse of the mortgage market; unscrupulously fudged your checking account balances to euchre you out of billions of overdraft fees; “red-marked” your credit cards to maximize charges, interest rate and penalties; stiffed you with excessive ATM tolls; and inveigled new ways to increase your checking account costs. Though these issues might rise in value, owning them suggests that you approve of their evil intent, sort of like inviting a pedophile home for dinner.
I think there’s superior long-term opportunity with small banks that are community oriented and based in their service area. The following banks once traded in the $20s, $30s and $40s, and now trade under $10 per share. As the economy slowly recovers, I believe that most smaller banks will provide better appreciation potential than the big ones. Consider buying equal dollar amounts of the following:
KeyCorp (KEY-$8.50) traded in the high $30s a few years ago. Home ported in Cleveland, this $4.2 billion revenue bank has 1,000 offices in 16 states and should earn 40 cents per share in 2011, up from a penny this year. The dividend could be raised in 2011.
Regions Financial Corp. (RF-$6.30) in Birmingham, Ala., has 1,800 branches in l6 states, $6.6 billion in revenues and expects earnings of 33 cents per share in 2011 versus a loss of 65 cents per share in 2010. I expect the dividend to increase in 2011.
Synovus Financial Corp. (SNV-$2.04) from Columbus, Ga., owns 41 community banks in five states in the Southeast. SNV, with $1.1 billion in revenues, has been around since 1888, but doesn’t expect to be profitable in 2011, nor will the dividend be raised. However, it still represents a dandy speculation.
Huntington Bancshares Inc. (HBAN-$5.64) of Columbus, Ohio, was founded 144 years ago and has more than 600 branches in eight states. HBAN could earn 14 cents per share in 2010 on $2.6 billion in revenues; in 2011, it should earn 43 cents per share. There’s a remote chance of a dividend increase from the current penny per quarter.
Whitney Holding Corp. (WTNY-$8.29) out of New Orleans has been banking money since 1883. However, WTNY won’t be in the black in 2011.
First Commonwealth Financial Corp. (FCF-$5.99) of Indiana, Pa., with an $8.10 per share book value, has 125 branches in 15 counties. Earnings should improve to 40 cents per share from a loss last year on revenues of $257 million. Meanwhile, there’s a remote possibility of a dividend increase in 2011.
Please address your financial questions to Malcolm Berko, P.O. Box 1416, Boca Raton, Fla. 33429 or e-mail him at malber@adelphia.net. ©2010 Creators.com
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