Tags: Bank | stocks | scandal | rally

Analysts: Investors View Bank Stocks as Teflon

Friday, 24 Aug 2012 01:29 PM

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Bank stocks continue to rebound no matter what scandal comes their way, according to CNNMoney.

Take Standard Chartered, the British bank accused of laundering money for Iran.

The stock has recouped nearly all of its losses since U.S. regulators threatened to revoke its license.

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.  

Meanwhile Barclays paid $453 million in fines to U.S. and U.K. regulators in June amid accusations it manipulated the London Interbank Offered Rate, yet its stock is close to levels before the scandal.

Fines slapped on banks for such alleged misdeeds pale in comparison to the size of their assets, experts tell CNNMoney.

“No matter how large a fine is, it’s never meaningful in the long run,” said Erin Davis, an analyst at Morningstar who covers Standard Chartered, according to the newspaper.

Other experts point out that when bad news hits the wire, investors sell too fast.

“We’ve seen again and again that the market overreacts to litigation and regulatory issues,” Brad Hintz, a banking analyst at Sanford Bernstein, tells CNNMoney.

“That’s because it is very difficult to judge whether you have permanent damage to the franchise, or just a headline issue.”

Even JPMorgan Chase, which came through the 2008 financial meltdown largely unscathed, took a hit across the chin when a trading loss at a U.K. investment office cost the bank close to $6 billion.

Meanwhile, bank stocks have led in the recent Standard & Poor’s 500 rally, as investors have viewed financial stocks as undervalued due to selloffs amid U.S. and European economic uncertainty.

“Earnings production is moving toward a normal condition and it’s hard to point to a group that has been more out of favor than bank stocks,” said Keith Wirtz, chief investment officer at Cincinnati-based Fifth Third Asset Management, according to Reuters.

“As we look out to the next three to five years, it’s inappropriate to have any kind of underweight bet on the group.”

Editor's Note: Unthinkable Haunts Investors: Evidence for Imminent 90% Stock Market Drop.

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