Bank Stocks, will they ever recover?

I hold some shares of C and BAC. I can wait 30 years for them to turn around, it's no rush, I was just wondering everyone's opinion of whether banks are ever going to recover anytime in the next 5 years.

Hi Samuel,
Yes, they will recover, especially if you own one of the better banks that weren't involved in the mega sub-prime write-offs or the CDO's circus. The best example is probably JP Morgan Chase, they are eating some mortgage losses, but compared to many of the other major financial institutions, they're in great shape because they weren't taking the nutty gambles that their competitors were taking. Banks like this, whose stock prices are down from guilt-by-association will likely recover in less than five years.

Even some of the banks getting battered the worst, such as Citi, will eventually recover but it will take longer. The only stocks you'd have to worry about never recovering are those that are small enough to get into the kind of trouble that Bear Stearns experienced where they had to either sell out or file bankruptcy because they couldn't meet their capital requirements.

Why am I confident that the major banks will recover? Because the losses are slowly and painfully working their way through the system and no recession lasts forever despite what doom and gloom you may see on the news. Eventually, comparisons will start looking pretty good even if the economy isn't out of the woods. When that happens, the smart first movers will pour money into the market and the next bull rally will be on.

This would probably make more sense with an example... Citi's comparisons will eventually look good even if they're still losing money. They lost $10+ Billion in the 4th quarter of 2007 when they moved losses onto the balance sheet, another mega-loss in Q1 '08 and it sounds like they're going to take another beating in Q2 '08. Now, let's say Q3 rolls around and they lose $1 Billion. If they've had multibillion dollar losses for three quarters in a row and the stock has plummeted by about 70% (currently down from $55 June '07 to $17 today), the stock will look like a very good deal to value investors. They'll jump in and be followed by a lot of institutional investors and you'll see the stock price head back up toward historical ranges... might take a while to get there though, so it's a good thing you have a long investing time horizon.

If you're looking for a low-maintenance passive strategy so that you don't have to sweat this stuff you should probably give Index Investing a look. You can learn more about this and other popular investing strategies at http://www.money-and-investing.com/Best-Index-Funds.html and http://www.money-and-investing.com/Stock-Market-Investing-Strategy-c.html.

Best of luck, Samuel. My advice, buy-and-hold-and-hold-and-hold-and-hold.... and then retire wealthy.

Cheers,
Odd Lot

If they don't we are in deeper doodoo than the media has reported. I think after they digest their bad debt write-off's, they will be fine.

Every since the stock exchange started in business, the market goes up and the market goes down. At the present time, the market is down, but in a few months it will be back up again.

No one knows for sure, but when the economy gets stronger so will the stock market, in fact, the market will move upward before the economy.
And the bank stock will roll back with the market, they always have.

As we roll near the end of this year we should see some industries improving, along with banking.

Our only concern with the economy is what will happen after the elections. The Liberals with their tax increases and their prohibition of offshore drilling could cause a major slow down in the economy and have another lower market.

With C & BAC, they are both very strong banks despite all the write offs, both should be coming back strong, many of us are looking at them now as good buys

Yes. Maybe not every single bank but the major ones will and that you can bank on. I just recently took some money from shorting international emerging market funds and invested in larger financials here. I'm not saying I'm smart but I am following the smart money.

Tough times are great times for investors. More money is made during recessions than bull markets. The key is not when you sell ( I'm not saying this doesn't matter) the key is when you buy! Strong companies will survive bad times and buying their stock when it's on sale only makes sense.

Well...I would think it highly likely that they would recover given enough time...I have etrade stock that plunged due to the mortgage fiasco, so I can only hold and hope...

If not...the economy is in MUCH worse shape than anyone is suggesting...which would be an obvious problem...

The banking industry will recover as the economy recovers.There is no doubt about that as banks are financial services providers. But this current financial crisis and credit crunch are the worst they had experienced in the history of the banking business. Prudent management, consistent banking practices and good banker and customer relationship must not be compromised in the banking business.

Nobody knows exactly when the bank stocks will recover. If they did, they certainly would not be publishing it here on Yahoo Answers, they would be making the right moves at the right time without alerting others. In the long run, of course the bank stocks will come back. If your time horizon is 30 years I'd hold on. You also might want to get into a DRIP so can accumulate more shares at these cheap prices. Good luck.

The biggest ones will and teh smaller ones will eventually if tehy do not collapse. C and BAC are the two biigest banks in the US so the chances of them not recovering are low.

C announced that they will have to write off another $9B in loans which is insane, but I think they will recover in about 2 years. I am waiting to get some C.

When the market bottoms, the financials will be the stocks with the best increase in value. Several years from now you will look back and see that now (or in a few months) was the best time to get into them.

Good luck, you have two good picks, just hang in there.

The people saying yes are not rational. They say stuff only hoping. That is the problem. For C to come back to its highs it will have to return a compounded return of over 25% a year to get back to the highs. BAC will have to return over 18%.

The people saying that these stocks will be winners of that magnitude for the next 5 years are foolish. Those returns are abnormally high for the market, and I don't think we have seen bottom yet for these stocks. If they go lower, they will have to produce higher returns to come back.

Probably not. The banking industry would probably recover, but not necessarily individual companies. Untill now, the tech (NASDAQ) did not recover from their bubble levels, Japan stock market never recovered from their all time highs of 1990.
And I would think that C is even in more critical position. More writedowns are coming. But the most important thing is the ability of these firms to competitively generate profits in the future.

Enter Your Message or Comment

User Name:
User Email:
Post a comment:

Archive: Forum -Forum -Finance - Links - 1 - 2 - RSS - All RSS Feeds
The Causes and the Results. 0.024
Copyright (c) 2011 Financial Crisis Monday, May 28, 2012 - Terms of use - Privacy Policy