Stock Strategist: Reaffirming Our Call on U.S. Banks--We Think They're Ready This Time

[Morningstar Logo]( [Company Site]( [Company News]( [Membership]( [Portfolio]( [Stocks]( [Options]( [Funds]( [ETFs]( [Markets]( [Tools]( [Personal Finance]( [Discuss]( Stock Strategist Reaffirming Our Call on U.S. Banks--We Think They're Ready This Time After an in-depth reassessment, we still believe they're undervalued. [tab_bar] by Eric Compton, CFA | 4/13/2020 5:30:00 PM Today, bank valuations are about as cheap as they have been since 2008. We had thought for the past two years that the next great buying opportunity for the banks would probably come during the next downturn. Our thesis was based on analysis that showed that the banks were ready this time. However, we did not predict a downturn driven by something like the COVID-19 pandemic. The current situation is unprecedented in many ways, so we re-evaluated our thesis to make sure we are fully cognizant of the increased risks. The bear case of a second Great Depression seemingly had a probability of 0% before COVID-19, but now it’s worth considering. Today’s debate is not about earnings per share; it is about capital adequacy and the solvency of the U.S. financial system. After a deep re-evaluation of what we are up against, we believe it is still appropriate to view the U.S. banks as undervalued. The risks are real, but the banks are ready for almost any hit to capital. Our base case is that the U.S. economy and financial system will be intact after COVID-19. To read more, click [here](. Sponsored Links [Buy a Link Now]( Podcast: Investing Insights From Morningstar.com Listen to a roundup of the latest videos featured on Morningstar.com [in this podcast]( available through iTunes. Free Issue | Morningstar's Stock Newsletter >> Morningstar StockInvestor is celebrating more than 10 successful years of high-quality stock investing. Its two real-money portfolios have outperformed the S&P 500 since 2001. [Get new ideas for the core of your stock portfolio](. Search Most Recent Articles [Big Disparities Among the Biggest Stock Funds in the Bear Market]( [Morningstar Analyst Rating Activity in a Tumultuous March]( [A Checklist for Volatile Markets: Retiree Edition]( Latest Analyst Reports [Becton, Dickinson]( [Alphabet]( [Altice USA]( [Ansys]( ABOUT OUR EMAIL TO UNSUBSCRIBE this email address to the Stock Strategist newsletter, please click "reply" and then click "send." This will unsubscribe only this email address to this specific newsletter. All subscription changes will take effect within one business day. Replies are not read by individuals, so please do not use this for queries about Morningstar.com. If you have questions about Morningstar.com or your membership, send a note to [joe@morningstar.com](mailto:%20joe@morningstar.com). ABOUT OUR PRIVACY POLICY Please [click here]( to learn about Morningstar's privacy policy. (c) Copyright 2020. Morningstar, Inc. 22 West Washington Chicago, Illinois, 60602 All rights reserved.