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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.

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Editor’s note: Read the latest on how the coronavirus is rattling the markets and what investors can do to navigate it.

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.

Eric Compton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.