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NEW YORK (
TheStreet) -- Although banking sector investors have taken it on the chin so far this year, analysts see tremendous upside for many familiar names.
KBW Bank Index (I:BKX) was down 3% year-to-date through Friday's market close, giving up 10% for the 52-week period. Meanwhile, the
S&P 500 Index (SPX.X) was up 6% year-to-date, and 16% for one year.
"The worst part of this dismal relative performance is that the major banks are producing earnings that have largely met or exceeded Wall Street's expectations," says Nancy Bush, a contributing editor with SNL Financial, who added that the large banks "are beginning (just) to show some incipient signs of loan growth."
The "big four" of
Bank of America (BAC - Get Report),
JPMorgan Chase (JPM),
Citigroup (C - Get Report) and
Wells Fargo (WFC - Get Report) have been trading at single-digit multiples to forward earnings estimates for quite some time, as the group faces what can seem to be a daily onslaught. Regulators are implementing new rules and keeping a tight hand on dividends and stock buybacks as the industry continues negotiating with federal regulators and state attorneys general over mortgage servicing and foreclosure practices.
The largest names also have seen year-over-year
revenue declines from weak loan demand and declines in credit card fee income and checking account overdraft fees, brought about mainly by regulatory changes springing from the CARD act of 2009 and the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law by President Obama last July
The largest bank names have also seen year-over-year declines in their net interest margins, with a continued environment of very low interest rates and weak loan demand.
Despite the challenges, analysts still see hope for many banks, with it being pretty obvious that patience will be required.
To come up with our list of 10 actively traded bank stocks with significant upside potential, we began with publicly traded bank and thrift holdings companies -- excluding those traded on the Pink Sheets -- with average daily trading volume of over 50,000 shares, then isolated the 10 with the greatest upside potential, based on the mean price targets among analysts polled by FactSet. We pared the list further, by only including names with at least two "buy" recommendations from analysts.
All data was provided by SNL Financial. Most of the listed names posted weak first-quarter earnings, with the smaller banks still suffering elevated credit costs.
Here are the
10 actively traded bank stocks on our list, ranked by ascending upside potential: