"Almost untouched by the subprime scandal and the subsequent credit fallout, Canada's banks are strong and their risk of writeoffs are consider by most analysts as minor," notes Genia Turanova and Gregory Dorsey in Leeb's Income Performance Letter.

Here, they look at two favorites in the Canadian banking sector: Toronto-Dominion Bank (NYSE: TD) and Royal Bank of Canada (NYSE: RY).

"Toronto-Dominion and its subsidiaries, collectively known as TD Bank Financial Group, serve more than 14 million customers. The group offers a full range of financial products and services including wholesale banking securities, personal and business banking, wealth management and U.S. personal and commercial banking.

"TD Bank is looking to expand its US presence by acquiring New Jersey-based Commerce Bancorp. After the acquisition is completed, TD's US banking operations will double. As for the hot topic of all financials these days – its subprime exposure – Commerce Bancorp's $16 billion loan portfolio has no subprime exposure.

According to the article: "I would not be averse to a Fed-assisted transaction," Stumpf said, adding that any deal would have to meet the company's traditional acquisition targets and benefit the bank's acquired customers. Wells has built a reputation as a disciplined buyer over the years, focusing on deals that generate at least a 15% internal rate of return and contribute to the bottom line within three years.

"Fixer-uppers don't bother us," he added.

Who wouldn't want to be part of a deal like this? It's become pretty obvious that JP Morgan Chase got an amazing deal to buy Bear Stearns, and now Wells Fargo wants to join the party.

The head of German banking giant Commerzbank (OTC: CRZBY) says that there are more rough seas ahead for the banking industry, particularly in the US. "Bankers did not adequately understand these (mortgage) investments and relied too heavily on high-grade credit ratings from agencies that helped put together the products, then rated them," Klaus-Peter Müller told The New York Times. "This ignorance of the risks extended to the top echelons of the banks."

Not a very pleasant way to talk about your peers, but probably accurate nonetheless.

Commerzbank has already admitted to $1.8 billion in subprime exposure, but Müller fears that US banks are being selective in their disclosures in the hopes that some of the problems will go away. He is also concerned that US banks used the opinions of ratings agencies to make investment decisions instead of doing their own risk management.

In general, Müller is probably right. If his hint about US banks being slow in disclosing problems is true, he may feel that there is another shoe to drop in the form of more big write-offs before the end of the year.

That would put much more pressure on banking stocks.

Douglas A. McIntyre is an editor at 247wallst.com.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Citigroup Inc. (NYSE: C) is the top conservative investment for 2007 from Kelley Wright. The editor of Investment Quality Trends notes, "I know this company has been public relations-challenged, but let's consider the fundamentals.

"First, it's not only undervalued, it's trading almost 71% below its historic undervalued dividend yield of 2.20%. In dollar terms, the stock can appreciate $37 to $89 and still represent excellent historic value!

"Second, the stock has earned an A+ ranking by S&P for earnings and dividend quality; S&P doesn't hand out an A+ easily. The stock has also earned our 'G' designation, which denotes a remarkable 10% annual dividend growth over the past 12 years. And, the stock has a P/E of 11 and is trading right at 2 times book value; numbers Benjamin Graham would like.

"CEO Charles Prince is feeling the heat on unlocking shareholder value. Based on recent management restructuring, it appears they will attempt to boost earnings by cutting costs and trying to squeeze value from every corner of this far-flung enterprise. At the end of the day though, I think Prince will have to do more and the Street will reward those efforts."

To see Kelley's favorite speculative idea for 2007, click here.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

United Overseas Bank Limited (Other OTC: UOVEY) is the top speculative idea for 2007 from Yiannis Mostrous. The global expert and editor of The Silk Road Investor -- and author of a new book by the same name -- explains, "United Overseas is a play in the positive changes taking place in Singapore, which continues to improve its image and attract the affluent from across Asia.

"United Overseas has been steadily improving operations and asset quality while expanding into Thailand and Indonesia.The bank has achieved a healthy mix of non-interest and interest-based income, with non-interest income growing strongly -- always a good thing. Its non-performing loan ratio dropped from 8.5% to 5.6% during the past year.

"Though Singaporean banks have been slow growers for sometime, improvement is visible as the economy enjoys strong growth amid a reflationary environment. As a result, loan growth could easily reach double digits next year. Banking stocks should eventually trade at a premium to the market, especially as return on equity improves through growth.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Sydney, Australia's Macquarie Infrastructure Company Trust (NYSE: MIC) is the top conservative idea for 2007 from Neil George, editor of Personal Finance, while Macquarie Infrastructure Group (OTC: MCQRF), is his top speculative play.

The advisor explains, "Infrastructure is the foundation of our economy. And whether owned by privateers or the public, we need more and better roads, bigger airports, better power and water systems. And there are companies getting the bids over and over again to make it all happen.

"Sydney, Australia might not come to the forefront of your mind when it comes to our nation's infrastructure, but that's where most of the capital is being pooled together to quietly gobble up deal after deal.

"Parent company, Macquarie Bank, first cut its teeth on financing and investing in several projects in its own back yard for years before taking its deal-making skills on the road.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Popular, Inc. (NASDAQ: BPOP) is the top speculative play for 2007 from Kelley Wright. The editor of Investment Quality Trends notes, "We aren't big risk takers. That being said, Popular is an interesting undervalued idea.

"First the numbers: an A+ S&P Earnings and Dividend Quality Ranking; our designation for spectacular annual dividend growth of at least 10% for the last 12 years; a P/E of 12; and the stock is trading at less than 2 times book. The stock's historically undervalued yield is 3.10%. Based on the current dividend of $0.64, that equates to a price of $21, and the stock is trading around $17.50.

"The customer base for Popular is the fastest growing demographic in North America: Hispanics. Popular has found a way to market and deliver banking and other financial products to this group, which has traditionally not trusted financial institutions because of their negative experiences with banks in their country of origin.

"We believe this will not go unnoticed by larger, more established banks in the B of A genre. Even without a buyout by another institution, the stock just needs to climb back to its undervalued area to return approximately 18% before the dividend. While 2006 was a disappointing year for BPOP shareholders, we believe 2007 should be a turnaround year and shareholder patience will be rewarded."

To see Kelly's favorite conservative investment for 2007, click here.

Each year Steven Halpern, editor of TheStockAdvisors.com, surveys the leading financial newsletter advisors asking for their favorite stocks for the coming year. This article is part of his 24th annual Top Picks Report.

Fundtech Ltd (NASDAQ: FNDT), an information technology firm focused on banks, is the favorite idea for 2007 for conservative investors from Jon Markman. The editor of Strategic Advantage says, "Based in Israel, the small cap company is run primarily out of offices in New Jersey, and is a great play on the globalization of business in general.

"Despite its small size, with a market cap of just $180 million, it sells its cash- and payment-management software and services to dozens of leading U.S. and European banks, and has deep and growing relationships with two of the very largest: Citicorp in New York and HSBC Holdings (HBA) in London.

"The European Central Bank has issued regulations demanding that banks in all European Union countries charge customers the same amount to move money internationally as domestically. Fundtech has a product that addresses these challenges.