20.3%

American Express (NYSE: AXP)

$8.5 billion

20.2%

Capital One Financial (NYSE: COF)

$3.6 billion

18.2%

Source: The Supervisory Capital Assessment Program, overview of results, May 9, 2009.

But even those figures don't tell the full story. Under the "more adverse" scenario, average unemployment was considered 8.9% this year and 10.3% in 2010. Unfortunately, the unemployment rate in the first half of the year was already at 8.65%, and it reached 9.5% in June. In that context, I think it's highly likely that reality will turn out to be "even more adverse." Because unemployment is one of the best predictors of credit card losses, we should expect bank losses to exceed initial estimates.

The good news for stock pickers
This suggests that banks could still have some unpleasant surprises in store for us when they announce earnings over the next 18 months. Nevertheless, I continue to think this is one of the most attractive sectors for serious stock pickers. The risk of financial meltdown has receded, but valuations remain depressed due to the uncertainty concerning future profitability, spelling opportunity for investors with cash on hand and a steady temperament.

Looking for specific names? Morgan Housel highlights three high-quality companies that are still cheap.

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