| As the number of small lenders achieve | | | | There are other financial services firms, however, |
| recording-setting results in terms of their failure | | | | that are properly capitalized and who have |
| rate, it may seem uncharacteristic to invest in | | | | actually been achieving year-over-year profitability. |
| financial services firms. However, with some of | | | | In addition, they continue to offer and increase |
| the larger banks slowly returning to profitability, | | | | their dividends. Surprisingly, some of them are |
| the contrarian approach of investing in firms that | | | | even located in higher risk areas, like California. |
| others are apprehensive about makes plenty of | | | | The reason why investors should benefit in the |
| sense. | | | | future has to do with how these lenders and |
| In fact, with the government announcing recently | | | | financial services firms conduct their business. If |
| that it will sell its stake in Citigroup this year (at an | | | | they are more prudently underwriting their |
| arguably tremendous profit), the signs are clear | | | | mortgages and remain viable in terms of their |
| that the financial services sector is actually on a | | | | capital positions and show positive trends in |
| healthy path to recovery amidst record-setting | | | | profitability, then it is quite likely that they will |
| numbers of smaller, regional-sized bank failures. | | | | continue to pay those dividends and reward |
| Does that mean that investors who are keen on | | | | shareholders with capital appreciation in their stock |
| achieving great profits should be investing in the | | | | value. |
| larger banks, like Citigroup, Goldman Sachs, Wells | | | | As well, with consumer spending on the rise, |
| Fargo and so on? Not necessarily. Investors with | | | | many of these financial services firms are poised |
| the right appetite for risk and with enough of a | | | | to experience long-term growth in the years to |
| long-term investment horizon might actually profit | | | | come as people return to work and start |
| much more from some of those smaller, regional | | | | spending more and more on credit. While the |
| banks. | | | | underwriting process might become more difficult, |
| Something that all investors who are interested in | | | | defaults will also be reduced; financial services |
| financial services should remember is that there | | | | firms that are already reporting profits and |
| are several types of smaller banks. Some are | | | | showing solid fiscal strength will only benefit from |
| heavily involved in real estate lending than others | | | | the failures of so many of their peers. |
| and depending on their geographic location, this | | | | The investor who is able to find the best and |
| could be an unfortunate business choice (in fact, | | | | "right" financial services firms among the many |
| of the four most-recent failures, three were | | | | not-so-good firms will clearly profit substantially. |
| located in Arizona and Florida, two of the | | | | The trick, of course, is to find which ones are |
| hardest-hit states in terms of real estate prices | | | | deserving of your investment dollars. |
| and unemployment). | | | | |