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Flee to Canada to Dodge U.S. Bank Stock Risk

In contrast, the big four U.S. banks have seen lumpier earnings -- padded greatly by the release of loan loss reserves -- and much weaker stock performance. With three out of four trading below tangible book value and all four trading at low multiples to forward earnings, analysts see bargains. Then again, at the end of last year they saw bargains, with the picks backfiring for investors.

  • Shares of JPMorgan Chase (JPM) closed at $30.46 Thursday, declining 27% year-to-date. The company is unique among the big four, with a 3.28% dividend yield, based on a quarterly payout of 25 cents. JPMorgan's ROA has ranged between 0.76% and 0.87% over the past year. The company is also unique among the big four U.S. banks in releasing "just" $170 million in loan loss reserves during the third quarter, providing relatively little padding to its $4.3 billion in third-quarter earnings. The shares trade for six times the consensus 2012 EPS estimate of $4.88 and for just under tangible book value. Out of 25 analysts covering JPMorgan, 23 rate the shares a buy, while the remaining two analysts have neutral ratings. The consensus price target is $45.91.
  • Bank of America closed at $5.53 Thursday, with the overhang from mortgage losses, continued mortgage putback demands and concern over capital pushing the shares down 58% year-to-date. The shares trade for 5.5 times the consensus 2012 EPS estimate of 99 cents, and for just 0.4 times tangible book value. Because of the low valuation, there are still 10 analysts rating the shares a buy, while 13 analysts have neutral ratings and one analyst recommends selling the shares. The consensus price target for BAC is $9.53.
  • Citigroup (C) closed at $26.99 Thursday, down 43% year-to-date. The shares trade for six times the consensus 2012 EPS estimate of $4.37 and for just over half their tangible book value. Out of 21 analysts covering Citi, 15 rate the shares a buy, four have neutral ratings, and two recommend selling the shares. The consensus price target is $42.39.
  • Wells Fargo has performed best this year among the big four, with shares down only 16% to close Thursday at $25.64. Based on a quarterly payout of 12 cents, the shares have a dividend yield of 1.87%. The shares trade for eight times the consensus 2012 EPS estimate of $3.20 and for 1.5 times tangible book value. Out of 23 analysts covering the shares, 20 rate Wells Fargo a buy, while two analysts have neutral ratings and one recommends selling the shares. The consensus price target is $32.57.

The analysts love the big four U.S. banks, based on the low multiples to forward earnings estimates and to tangible book value. But the market doesn't love them, and as we have seen, the analysts have been "early" on their predictions for recovery in the shares of the largest U.S banks.

Years early.

So if you think that the worst is over for the big four U.S. banks, and that the regulatory and mortgage putback pressure will subside in 2012, you're looking at some amazing bargains

If you would like to take a more conservative approach amid continuing uncertainty, while collecting a decent dividend yield, head north.

-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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