5 Bank Stocks That Could Jump on 2012 M&A (Update 1)

5.Boston Private Financial Holdings

Shares of Boston Private Financial Holdings (BPFH) is a rare outlier among bank stocks, gaining 19% in 2011 in a year when bank stocks have been deep in the red.

The bank through independently operated affiliates offers investment management and wealth advisory services to high networth investors and institutional clients. It has over $6 billion in assets and $4.5 billion in deposits.

The bank has already been featured in TheStreet's 10 Community Bank M&A Targets.

The bank turned around in the third quarter, posting a net income attributable to common stockholders of $11.4 million, or 14 cents per share, compared with a loss of $7.1 million, or 10 cents per share, a year ago.

Boston Private's operating expenses fell 9 percent to $55.4 million, while its loan loss provision fell 86 percent to $4.5 million.

The bank said in a recent investor presentation that it is investing in private banking franchise building and client acquisition across banking and wealth management businesses.

"Investors are looking for well-balanced bank stocks with solid capital, growing EPS from real revenue expansion, and an attractive franchise that someday could be attractive to a third-party financial institution," FIG Partners analyst Christopher Marinac wrote in an Oct. 27 report.

Still, a sale in 2012 is unlikely, according to KBW analyst Chris McGratty. "The company is in year 2 of its turnaround. It is going very well and the turnaround story has atleast another year of leg to it," he said. The bank figures in KBW's potential sellers list for two reasons- its attractive franchise value and the fact that it has a significant private-equity ownership.

McGratty has an outperform rating on the stock with a price target of $9.

Four analysts rate the stock a buy or outperform, while five have a hold rating on the stock.

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