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Banks to Bet On -- or Abandon

S&P has strong buys on several big names, but credit-quality worries prompt it to put an avoid some others

In the financial sector the big wild card for earnings -- and performance of financial stocks -- will be credit quality, believes Stephen Biggar, Standard & Poor's analyst of banking and financial-services stocks. However, Biggar reports that S&P has strong buy recommendations on three large-cap banks: AmSouth (ASO ), Bank of America (BAC ), and Citigroup (C ). And his fellow S&P analyst Evan Momios adds similar ratings to smaller banks Commerce Bancorp (CBH ), Wilmington Trust (WL ), Banknorth Group (BNK ), National Commerce Financial (NCF ), and City National (CYN ).

Worries about credit quality hold down the S&P rankings of a number of other banks. One giant, JP Morgan Chase (JPM ), carries an avoid label partly for that reason. Biggar feels that credit quality is particularly an issue in the commercial area.