Updated with morning market action.
NEW YORK (TheStreet) -- Atlantic Equities analyst Richard Staite continues to make the case for Bank of America's "near-term catalysts plus a good long-term earnings story."
After meeting in London with Bank of America CFO Bruce Thompson, Staite on Thursday reiterated his "Overweight" rating for Bank of America and $12 price target, saying that Thompson "expressed confidence that in Q4 there will be a decline in Legacy Asset Servicing costs, that mortgage delinquencies will decline and that the NIM will benefit from lower funding costs."
Following a brutal 7% pummeling on Wednesday in the wake of President Obama's reelection, Bank of America's shares led the market in morning trading on Thursday, with shares rebounding by 3% to $9.48.Staite last month upgraded Bank of America from a neutral rating, as the company "has a bigger cost-cutting story, greater potential to reduce funding costs and faster improvement in capital ratios," relative to peers. Bank of America's shares closed at $9.23 Wednesday, returning 67% year-to-date, following a 58% return in 2011. While the shares are trading at just 0.7 times their reported their reported Sept. 30 tangible book value of $13.48, it would appear that investors agree with Staite, since the shares trade at the highest multiple to forward earnings among the "big four" U.S. banks. Bank of America's shares trade for 9.5 times the consensus 2013 earnings estimate of 97 cents a share, among analysts polled by Thomson Reuters. Here's a quick comparison of valuations for the rest of the big four:
- Shares of Citigroup (C) closed at $36.05 Wednesday, returning 37% year-to-date, following a 44% decline last year. The shares trade for 0.7 times their reported Sept. 30 tangible book value of $52.70, and for eight times the consensus 2013 EPS estimate of $4.64.
- JPMorgan Chase (JPM) closed at $40.46 Wednesday, returning 25% year-to-date, following a 20% decline during 2011. The shares trade for 1.1 times tangible book value, according to Thomson Reuters Bank Insight, and for eight times the consensus 2013 EPS estimate of $5.32. In addition to historically attractive valuations, JPMorgan's shares have an attractive dividend yield of 2.97%.
- Shares of Wells Fargo (WFC) closed at $32.91 Wednesday, returning 22% year-to-date, following a 10% decline during 2011. The shares trade for 1.5 times tangible book value, and for nine times the consensus 2013 EPS estimate of $3.63. Based on a quarterly payout of 22 cents, Wells Fargo's shares have a dividend yield of 2.67%. Wells Fargo higher multiple to book value reflects the company's status as the best and most consistent earner among the big four, with operating returns on average assets (ROA) improving from 1.27% to 1.46% over the past five quarters, according to Thomson Reuters.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV