Skip Scandal-Filled Wells Fargo (WFC) in Favor of These Bank Stocks

Banks are in the headlines again for all the wrong reasons. This time, it’s Wells Fargo (WFC) that’s being raked over the coals. The company was found to have created millions accounts for customers who never wanted them in the first place. Wells Fargo paid a $190 million settlement for the phantom accounts.

The fine is a drop in the bucket for company with a market cap of $225 billion. The reason Wells Fargo dropped 7 percent since the settlement was reached is these egregious violations of the customers’ trust point to some serious problems with the company’s management.

Never mind the high-pressure culture that pushed employees to open these illegal accounts. While thousands of people were fired in the wake of the scandal, the higher-ups overseeing this division remain in place.

Looking Beyond Wells Fargo

This lack of justice — even if it’s simply a perceived lack of justice — has plagued banks since the financial crisis of 2007. Most banks have been able to claw themselves back to respectability and profitability, yet they’re still on shaky footing with both investors and the general public.

The financial sector has gradually been reaching stability after the uncertainty of the financial crisis. As egregious as the Wells Fargo scandal was, the sector still offers some promising opportunities to investors. These better-behaved companies are also poised to benefit from Wells Fargo’s misfortune.

Bank of America (BAC)

During the financial crisis, Bank of America was one of the bigger losers. Its disastrous 2008 acquisition of mortgage lender Countrywide set the company back years and was a $40 billion mistake. Most investors had no interest in being dragged down by the bank.

However, a lot changed in a few years. While Bank of America isn’t as robust as it was in the pre-collapse days, it’s managed to achieve stability and is arguably undervalued as it exits the legal nightmare the crisis caused. Profits have been steady, and its Q2 2016 earnings were the best in years.

Another sign of strength is the return of Bank of America’s dividend. After lowering its quarterly dividend to a penny in the wake of the financial crisis, the dividend has been raised twice and yields nearly 2 percent annually.

Citigroup (C)

Citigroup’s collapse during the financial crisis was spectacular, with shares plummeting from north of $550 to $10. The beleaguered company won’t be coming back to those highs anytime soon, as shares are presently valued at $47.

The financial crisis was a hard reset for the company, and it’s become stronger in the past few years. Its most recent earnings show the company is on the right track. The $17.55 billion in revenue exceeded expectations by a little under $100 million. Citigroup was also leaner than in the past, with operating expenses down by 5 percent and efficiency on the rise.

U.S. Bancorp (USB)

Shares of U.S. Bancorp have exceeded their pre-financial collapse levels and are trading near all-time highs. While they’ve recovered strongly — especially compared to some of their competitors — U.S. Bancorp isn’t completely out of the woods yet.

The bank recently lowered its revenue expectations, citing low interest rates and slower economic growth than expected. Those conditions aren’t ideal for any financial institution and highlight the ongoing struggles banks are facing. However, those bearish prospects are also why banks are trading with low price-to-earnings ratios.

As uncertain as the future is, banks can offer value to investors open to a little risk. Financial industry stocks aren’t the flashy investments they were in their pre-collapse days. Yet they’re now more stable than they were in years past.

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