The financial meltdown that began in 2007 took a toll on bank stocks. In 2012, the category began to make a comeback, and that's likely to continue in some areas -- notably investments and commercial banking, according to one analyst.
One bank in particular has been getting a lot of attention recently. Near the end of last year, a very high-profile analyst, Meredith Whitney, said that Bank of America was likely to quadruple its dividend payment in 2013. This week, it came out through regulatory filings that one of the biggest European hedge funds loaded up on BofA stock in the fourth quarter, InvestmentNews.com reported.
Whitney spoke to CNBC in December. From the story, "Bank stocks offer best opportunity in years: Whitney":
The main catalyst comes in March when the Federal Reserve is expected to approve banks' plans to return more capital to shareholders through dividends and stock buybacks in March, Whitney said.
Conservatively, that approval could allow BofA to quadruple its dividend, Whitney said.
In 2012 Bank of America shares increased 109 percent as net profits grew by 189 percent, the Financial Times reported on Tuesday.
While some analysts are touting Bank of America stock, not everyone is ready to give in to unbridled enthusiasm.
"We have a hold rating on Bank of America," says Shannon Stemm, financial services analyst at Edward Jones. "The stock is trading at depressed levels, and the future profitability potential of Bank of America is still uncertain."
The stock has done well over the past 12 months. However, the company has sustained billions in losses from lawsuits associated with the 2008 acquisition of Countrywide Financial, and there's still litigation pending.
While lawsuits may set BofA back, the financial sector as a whole may continue to make improvements through 2013.
"Asset managers are doing well and starting to see inflows, banks with capital markets operations are starting to see that come back; banks with brokerages are seeing individual clients as well as institutions looking to put money to work," Stemm says.
"In traditional banking even, on the commercial side, you're going to continue to see growth. There may be further weakness from the standpoint that consumers aren't taking out new loans, they're still paying down debt and getting their financial houses in order," she says.
Today's very low interest rates also cut into banks' profit margins.
Are you ready to embrace big banks again?
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