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10 Big Banks With Solid Revenue

NEW YORK ( TheStreet) -- With reserve releases distorting bottom-line numbers for the nation's largest banks, TheStreet has identified which large industry players have had the best year-over-year net revenue increases.

At this point in the economic cycle many of the largest banks have so much in excess loan loss reserves that it is appropriate for them to release reserves, which provides a direct boost to the bottom line but can obscure an important revenue story for investors.

The "big four" U.S. bank holding companies all appear to be value plays at this point, based on low valuations to forward earnings estimates, but -- aside from Bank of America (BAC - Get Report), which booked a large second-quarter loss -- the group's bottom-line improvement has been mainly driven by reserve releases, while revenue has declined

To gauge a bank's real revenue story -- irrespective of adjustments to loan loss reserves -- SNL Financial looks at pre-provision net revenue, which is defined as a bank's tax-adjusted net interest income plus its non-interest income, net of non-credit-related expenses.

The big four's low P/E valuations reflect investors' dismay with names seeing revenue declines.

Bank of America's forward price-to-earnings ratio was 6.4, based on Monday's closing price of $9.81 and the consensus 2012 earnings estimate of $1.52 a share, among analysts polled by FactSet. The company's $8.8 billion second-quarter loss, springing from its settlement of mortgage putback claims against Countrywide and other mortgage expenses, pretty much keep it out of this revenue discussion. The second-quarter net loss was mitigated by a $2.5 billion decline in loan loss reserves.

For JPMorgan Chase (JPM - Get Report), the forward P/E was 7.1, based on Monday's closing price of $40.44 and the consensus 2012 EPS estimate of $5.68. A second-quarter reserve release of $1.2 billion contributed to the company's $5.4 billion profit. JPMorgan's second-quarter pre-provision net revenue was $8.5 billion according to SNL, declining 16% from the second quarter of 2010.

Citigroup (C - Get Report) had a forward P/E of 7.5, based on Monday's closing price of $38.34 and a 2012 consensus earnings estimate of $5.13 cents a share. Second-quarter pre-provision net revenue declined 32% from a year-earlier, which was expected as part of CEO Vikram Pandit's "good bank/bad bank" strategy of letting non-core assets run-off. The $3.3 billion second-quarter profit reflected a $2.2 billion reserve release.

Shares of Wells Fargo (WFC - Get Report) were trading for eight times forward earnings, based on Monday's closing price of $27.93 and a consensus 2012 earnings estimate of $3.51. The company's second-quarter pre-provision net revenue declined 11% to $8 billion, according to SNL. Wells Fargo's $3.9 billion second-quarter profit was boosted by a $1.1 billion decline in loan loss reserves.

Our list of 10 large banks showing large year-over-year revenue gains was pared down from the 60 largest bank and thrift holding companies for which second-quarter data was available from SNL. With investors emphasizing revenue growth, it's no surprise that all 10 of these trade at significantly higher multiples to forward earnings estimates than any of the big four.

So as an investor, what do you want? The big four represent extraordinary value, based on the low forward P/E ratios and analysts' ratings. The following 10 are putting up the revenue numbers that investors crave, and not one of them has a single analyst with a "sell" ratings.

How about a bit of both? This is a great time to sniff for value bargains, and with all the economic doom and gloom, it's nice to pick a couple of revenue growth plays as well.

Here are the 10 large U.S. bank and thrift holding companies with the largest year-over-year increases in prove-provision net revenue:
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