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 263 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 mean our 170,000 CAPS members are confident that these stocks will beat the market in the months ahead, but let's see what members are saying about the ones below:

Sources: Motley Fool CAPS, Yahoo! Finance. NA = not available

The markets may be feeling better about the economy after a few reports have offset much of the drumbeat of negativism we've seen, and with the S&P 500 up 13.5% over last year, CAPS banking stock stocks did much worse. The average stock is up just 7% from the year-ago period. Of course, pressuring those returns were performances like those by Allied Irish Bank (NYSE: AIB), which is down more than 81% year-over-year, and Lloyds Banking Group (NYSE: LYG), which is down almost 22% in the same period.

So let's take a closer look at why investors think that some of these other companies won't be jumping from the frying pan into the fire now that the markets are roiled again.

Some spring in its step
Considering the risks to the financial system in Europe, it's surprising these three banks in particular have maintained their high ratings on CAPS. Greece, Ireland, and Spain are three of the so-called PIIGS countries that have been skirting default on their sovereign obligations (the other two are Italy and Portugal).

Irish bond yields are soaring again, peaking over 7%, as fears that austerity budget measures won't be enough to keep the country's debt in check. Ireland, for its part, is blaming the conditions in both Portugal and Spain as a reason for concerns over its own situation. That has it crafting a burden-sharing plan for bondholders in the banks it does own, like Anglo Irish Bank, but says that while it may end up eventually owning Allied Irish, the plan won't apply right now to it or Bank of Ireland.

Banco Santander, meanwhile, is being hurt by the bad loans it made, and it reported yesterday that third-quarter profits plunged 26% as a result. Not only is the real estate bust impacting Spanish banks like Banco Popular (NYSE: BPOP), but the tough new Basel III rules will require banks to bulk up with better quality assets. Santander says it supports the rules as "possibly the most significant for the international financial system in many decades." Yet it and Banco Bilbao Vizacaya Argentaria (Nasdaq: BBVA) rely less upon Spain for their revenues than rivals do, making it a better credit risk.

That's behind why CAPS member thenatural24 thinks Santander is more secure than its rivals:

STD is one of the strongest financial insitiutions in the world and has been using the depressed financial market to expand its international presence through selective acquistions in emerging markets. Santander pays a great dividend and is a shareholder friendly company. Take advantage of the turmoil in its home country's economy (Spain) and pick up STD on the cheap.

Driving a bargain
Greece's sovereign debt woes continue to infect its financial institutions, and National Bank of Greece, as the country's largest, has been hit particularly hard, causing its stock to sink. The bank maintains it doesn't think the country will default on its debt obligations, but the country's bond yields are on the rise again, raising fears that it may happen anyway.

Whatever the problems are in Greece, CAPS member vanzweb doesn't think they're so large that they'll spread the contagion to the rest of Europe:

Either way expect buying opportunities for the rest of the year. Greece is small enough that any crisis would not lead to world wide disasters.

Comparative to other banks losses at NBG has been less painful than most. That means when up time comes it will do better than BAC and friends.

He's not alone as 96% of the CAPS members rating the bank believe it will go on to post results that outperform the broad market averages. But let us know in the comments section below or on the National Bnak of Greece CAPS page whether you can bank on a turnaround here.

The ball's in your court
There are many factors that go into 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.