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10 Bank Stocks Bringing Home the Bacon (Mmm... Bacon)

NEW YORK (TheStreet) -- TheStreet has identified 10 quality banking franchises that earn through thick and thin.

At a time of so much uncertainty for bank stock investors -- with daily headlines of multiple threats, including European instability, stubborn unemployment, myriad regulatory threats to earnings and increased capital requirements -- there are plenty of strong banking franchises out there that always find a way to make money.

To come up with this list of 10 consistent earnings performers, we began with a list of all actively traded U.S. banks and thrifts -- excluding those traded on the Pink Sheets -- with average daily trading volume of over 50,000 shares. Then, using data provided by SNL Financial, we ranked the remaining companies by their mean returns on average assets (ROA) for the first three quarters of 2010, and the preceding four calendar years.

We also excluded any company with a negative year-to-date ROA for the first three quarters of this year, and any with a negative ROA during any of the preceding four years.

Along with stock performance beating the overall sector -- the KBW Bank Index (I:BKX) was down 28% year-to-date through last Friday -- these names all feature significant dividend payouts.

Four of the 10 banks are based in Texas, which really isn't that surprising, since the state, for the most part, has skirted the boom-and-bust real estate cycle of the past several years.

For a group with such consistent earnings performance through thick and thin, it is no surprise that all but one of the names trades for more than 10 times forward earnings estimates and only one trades below 1.5 times tangible book value.

In comparison, the headline-plagued "big four" U.S. banks trade at much lower multiples:

  • Shares of Bank of America (BAC) closed at $5.78 last Friday and traded for just 5.8 times the consensus 2012 earnings estimate of $99 cents a share, among analysts polled by FactSet. The shares were also trading for less than half of their Sept 30 tangible book value of $13.20, according to SNL.
  • Citigroup (C) was trading for just 6.0 times the consensus 2012 EPS estimate of $4.39 and just over half of tangible book value, based on Friday's closing price of $26.28.
  • JPMorgan (JPM) traded for 6.3 times the consensus 2012 EPS estimate of $4.89 and just over tangible book value, as of Friday, when the shares closed at $30.62.
  • The only member of the "big four" group of U.S. banks trading over book value at Friday's market close was Wells Fargo (WFC), which closed at $24.69, or 1.4 times tangible book, according to SNL. The shares traded for 7.7 times the consensus 2012 EPS estimate of $3.20.

Here are our quality list of 10 Bank Stocks Bringing Home the Bacon, ranked by ascending ROA for the first three quarters of 2011.

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