PNC Financial Services (NYSE:PNC), U.S. Bancorp (NYSE:USB), Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM) Top FBR Banking Picks

Even though banks will continue to experience a challenging environment, FBR Capital believes investors should still invest in them, and among their favorite picks are PNC Financial Services (NYSE:PNC), U.S. Bancorp (NYSE:USB), Bank of America (NYSE:BAC) and JPMorgan (NYSE:JPM).

FBR said, "Although we expect 2011 to be a challenging year for banks, we are positive on the industry as a whole and expect it to outperform other sectors as valuations are compelling. We favor large banks over regionals, given their diversified business models and their limited exposure to CRE; accordingly, our favorite names are The PNC Financial Services Group, Inc., U.S. Bancorp, Bank of America Corporation, and JPMorgan Chase & Co. Bank stocks have been beaten down in the face of headline risk related to reps and warrants exposure, foreclosure mania, and increased regulation and capital standards. We believe the sell-off was overdone given that the headline risk was overplayed. Further, regulators appear to be somewhat relaxing their stance on capital management and have opened the door to possible dividend increases in 1H11. Investors will view this as a positive, but we believe any capital management policies will be incremental until the economy materially improves. Although we are overall positive on banks, we recognize that there are additional headwinds: Fee income faces many hurdles as banks feel the full impact of increased regulation, and net interest income could remain under pressure as loan balances continue to decline. Credit costs also could remain elevated as banks work through their CRE and HELOC
exposure. However, we believe overall valuations are too compelling to ignore and should attract investors in 2011."

US Bancorp closed Friday at $26.45, up $0.61, or 2.36 percet. PNC ended the day at $60.67, down $0.90, or 1.46 percent. JPMorgan closed at $41.43, up $0.62, or 1.52 percent. Bank of America closed at $12.80, up $0.15, or 1.19 percent.