Bets on U.S. credit card companies may fetch gains for investors as the firms are set to benefit from the economic recovery, a fund manager with Invesco Aim said.

The credit card industry became very pessimistic on the potential for losses, but it now appears that the losses have bottomed and consumer credit quality is improving, said Michael Simon, the manager of Aim Financial Services fund.

Simon has the credit card industry as his top pick and his fund has stakes in Capital One Financial Corp and American Express Co .

Among the large-cap banks, Simon is bullish on Bank of America Corp .

It is the cheapest of all the large bank stocks in America and it has a ubiquitous deposit franchise that is underappreciated currently, he said.

I also like a small firm called FBR Capital Markets Corp and I think the company has a lot of pent up revenue generation capacity but it is trading at roughly book value.

Aim Financial Services fund had about $210 million in assets under management as of February 28. Simon, who oversees 10 funds at Invesco Aim, manages about $3.6 billion in assets.

Financial stocks in the United States are up about 175 percent from their March 2009 lows, but are still trading at a deep discount and could rise 50 percent or more as the recovery takes hold and the economy expands, the fund manager said.

The fund has stakes in companies as diverse as payment processors Automatic Data Processing Inc and Heartland Payment Systems Inc to insurer XL Capital to banks like Citigroup Inc and JPMorgan .

Simon, whose financial services fund lost 60 percent of its value in 2008, said the economic recovery has brought in a lot of opportunities for financials. The fund gained 27 percent in 2009.

The fund manager has a stake in H&R Block Inc , the largest U.S. tax preparer, which is struggling to maintain market share amid increasing competition from online players such as larger rival Intuit Inc .

Every sub sector has its issues but what I would say that there are opportunities across all the sub industries, Simon said.

(Reporting by Supantha Mukherjee in Bangalore)

Citigroup American Express