Detusche Bank's Mayo Slightly More Positive on Bank Stocks (C, WB, BAC, WFC, More...)

Detusche Bank analyst Mike Mayo is telling clients to reduce the degree of their underweighting on the banking group.

Mayo cited: 1. most big banks reported 2Q08 with no new capital issuances, 2. margins improved more than expected, helped by a steeper yield curve. 3. problems, beyond real estate, have not spread as much as feared.

However, Mayo said issues remains, including: 1. the degree to which the slowdown exposes increased structural risk, 2. possible additional moves by regulators (possible higher deposit insurance) and rating agencies, 3. macro factors (unemployment/inflation/housing/oil) and 4. continued market nervousness. Mayo said the bank group does not typically perform well until problem loans peak, which he said may not happen until mid-2009.

Mayo recently upgraded Citigroup (NYSE: C) from Sell to Hold and reiterated his Buy rating on Wachovia (NYSE: WB) today.

Other bank and financial stocks:

Comerica Incorporated (NYSE: CMA), Merrill Lynch (NYSE: MER), Bank of New York Mellon Corporation (NYSE: BK), Wells Fargo (NYSE: WFC), Morgan Stanley (NYSE: MS), PNC Financial Services Group Inc. (NYSE: PNC), BB&T (NYSE: BBT), Northern Trust Corp. (Nasdaq: NTRS), US Bancorp (NYSE: USB), State Street Corp. (NYSE: STT), National City Corporation (NYSE: NCC), SunTrust Banks Inc. (NYSE: STI), Bank of America Corporation (NYSE: BAC), Fifth Third Bancorp (Nasdaq: FITB), Lehman Brothers Holdings Inc. (NYSE: LEH), Goldman Sachs Group Inc. (NYSE: GS), KeyCorp (NYSE: KEY), JPMorgan Chase (NYSE: JPM).

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