This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

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

Stocks in this article: BAC C JPM WFC RY TD BNS BMO CM

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.

Readers Also Like:

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 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.
2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs