All five bank holding companies have pulled back significantly this year, with four of them declining even more than the KBW Bank Index (I:BKX) which had pulled back 32% year-to-date through Friday's close at 39.50.
All but one of the five names trade significantly below their Sept. 30 tangible book value, according to SNL Financial, and two of the names are more speculative, with with nonperforming assets increasing sharply late in the credit cycle.
Two of the names are expected by analysts to report full-year losses for 2011, although one of these is a very strongly capitalized bank, formed just over a year ago.Two of the five bank stock picks below $5 trade below seven times forward earnings estimates. A comparison to the "big four" U.S. bank holding companies -- all trading below eight times forward earnings, with two trading significantly below book value -- shows that the entire banking industry could be grossly undervalued, despite the continued political and media onslaught against the group.. Bank of America's (BAC - Get Report) forward price-to-earnings ratio was 6.4, based on Friday's closing price of $6.49 and a consensus 2012 earnings estimate of $1.02, among analysts polled by FactSet. The shares trade for just under half the company's reported Sept. 30 tangible book value of $13.22. For JPMorgan Chase (JPM), the forward P/E was 6.9, based on Friday's close at $33.97 and the consensus 2012 EPS estimate of $4.94. The shares trade just above their tangible book value of $32.53, according to SNL. Citigroup (C - Get Report) also has a forward P/E of 6.9, based on a closing price of $30.34 Friday and a 2012 consensus earnings estimate of $4.42. The shares trade for 0.6 times the company's reported Sept. 30 tangible book value of $49.50. Wells Fargo's (WFC) forward P/E was 7.9, based on Friday's closing price of $25.40 and consensus 2012 EPS estimate of $3.22. The shares trade just over the company's reported book value of $24.13, as of Sept. 30. Out of 895 publicly traded U.S. bank and thrift stocks -- excluding those trading on the Pink Sheets -- 273 trade for less than $5 a share, according to data supplied by SNL. We narrowed down the list down to 21 names with three-month daily average trading volume of more than 50,000 shares. We further pared the list to the five names with the most upside implied by mean price targets among analysts polled by FactSet, limiting the group to bank and thrift holding with "Buy" ratings from at least half the covering analysts. Here are the 5 Bank Stock Picks Below $5, ranked by ascending upside potential based on consensus price targets: