Can These Stocks Bounce Back?

However hard the market slams a stock, there's always the chance it'll come bouncing right back. We'll consult our Motley Fool CAPS community to find shares on the rebound, examining one specific sector of the economy in search of companies with rising CAPS ratings.          

There are 254 stocks listed under "banking" in the CAPS' screener, but more than a handful of them carry well-respected four- and five-star ratings. Those accolades signal our 170,000 CAPS members' confidence that these stocks will beat the market in the months ahead. Let's see what members are saying about the candidates below:

Source: Motley Fool CAPS; Yahoo! Finance.

Even though the S&P 500's up 12% over last year, CAPS banking stocks have fallen 5% in that same time span. Let's see why investors think the companies above could defy that trend and recapture at least some of their former glory.

Some spring in its step
Calamities elsewhere have swept the European financial crisis from the headlines, but the region's lingering economic uncertainty continues to fester, casting a shadow of doubt upon the performance of banking stocks around the world.

Europe had to bail out Greece, and now all eyes turn to Portugal as the next domino to fall. Moody's just downgraded the country's debt, and observers expect a bailout soon. Banco Santander's (NYSE: STD) Portuguese unit, Banco Santander Totta, had sidestepped a previous downgrade of banking interests by the rating agency; this time, it wasn't so lucky. Ireland just nationalized much of its banking system, folding all financial institutions into just two banks, Allied Irish Bank (NYSE: AIB) and Bank of Ireland (NYSE: IRE), thus guaranteeing their survival.

After getting bailed out and partially nationalized by the British government, Lloyds Banking Group has been struggling to regain its footing. It's slashed 26,000 jobs from its payroll since the depths of the financial crisis, and it's still cutting. Proposed regulatory reforms suggest that British banks will have to separate their retail operations from their trading arms, a process called ring-fencing, which many consider a preferred alternative to breaking the banks up.

With new management in place, CAPS member Teacherman1 expects that the fresh start will allow Lloyds to excel:

I expect the new CEO to use this opportunity to clean out some of the "trash" he inherited without having to take the blame for the losses. That way he gets to start with a relatively clean slate, and be the new "Golden Boy".

Tell us on the Lloyds Banking Group CAPS page whether it represents yet another member of the "too big to fail" club.

An ill wind blowing
The banking environment hasn't been much better in Puerto Rico. With its economy ravaged by the recession, island banking giant Popular reported fourth-quarter losses, primarily as a result of its increased loan loss provisions. Many mainland banks such as Wells Fargo (NYSE: WFC) have been dipping into their bad loan provisions, giving the impression -- not always justified - that they're doing better. While it may be refreshing to see Popular widened its reserves instead, it's also troubling, since it means that the bank's situation has gone from bad to worse.

CAPS investor ice23bear believes that if Popular can just tread water until the economy gets its legs again, it ought to be able to survive: "All they need to do is survive till there is a clear recovery in Puerto Rico and they will resume dividends and at least double in price."

Add Popular to your watchlist to see whether it's a bank you can bank on.

Milking the private sector
If all these big banking concerns are having problems, imagine the difficulties facing smaller institutions such as Synovus Financial. Though the worst of the financial crisis is fading, Synovus continues to post losses -- 10 consecutive quarters' worth so far.

Still, things are getting better. Synovus sharply narrowed the gap between the quarterly losses it reported this go-round and those it posted a year ago. Improving credit trends gives management hope for the future, particularly since the latest quarter marked the company's third sequential quarter of narrowed losses, and the lowest losses in two years.

CAPS member k0stid0g004 hopes that Synovus directors' insider buying reflects their confidence in the company's future:

Something could be good here. More than one director paid up to $2.80 per share on the open market in February. Pure speculation

Then again, maybe the buying has another motive, as MotleyNYSE suggests:

This is a regional bank potentially seen as a takeover target. Also, the bank has focused on its bottom line and customer satisfaction. I think this bank will do well in the end either way.

The ball's in your court
Many factors determine whether a stock is a buy or sell, so it pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page. Head over to CAPS today and share your thoughts with other investor analysts on whether you think these stocks are ready to bound higher.