Citigroup said there are substantial risks facing U.S. bank stocks now, but in the near term these stocks can grind higher given a combination of the Federal Reserve's accommodative stance plus a modest recovery.
Since there is above-average risk, we would remain very selective focusing on banks that have strong capital positions, while avoiding banks with the combination of relatively high commercial real estate exposure and questionable capital strength, Citigroup said in a note.
The brokerage upgraded BB&T Corp
Citigroup analysts, including Keith Horowitz, also kept their sell rating on the shares of Zions Bancorp
The analysts are also upbeat about the shares of Suntrust Banks
They estimated that banks in their coverage have crossed 55 percent of the credit cycle, though M&T Bank
Banks with excess capital will be key players when the credit cycle is over, giving them a chance to take advantage of opportunities such as acquiring weaker players and organic loan growth, the analysts wrote. (Reporting by Anurag Kotoky in Bangalore; Editing by Gopakumar Warrier)