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

Stocks in this article: BAC JPM RF SNV FHN WAL BPFH

1.Western Alliance Bancorporation

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Shares of Phoenix, Arizona-based Western Alliance Bancorporation (WAL) are down about 20% in 2011.

The bank operates over 40 bank branches in Arizona, California and Nevada. It has about $6.54 billion in total assets and $5.63 billion in total deposits.

The bank has a Tier 1 Common Capital ratio of 8.6% . The bank has repaid the $140 million in bailout money and has also repurchased warrants held by the U.S. Treasury.

WAL experienced strong loan growth of nearly 3% in the third quarter. Total operating revenues increased just 0.5% sequentially but together with a 13% drop in expenses the efficiency ratio improved to 63.2% from 72.9%. The drop was attributable to a decline in foreclosure-related writedowns/losses, which could tick up again if conditions worsen in Nevada, which has 40% of the company's total loans.

Non- performing assets rose 1% to $200.4 million or 4.34% of loans in the third quarter. Net charge-offs amounted to 1.4% of loans.

"While we recognize the lingering concerns about the credit exposure to troubled markets like Nevada and Arizona, ultimately we believe WAL shares could earn back a premium multiple given the company's strong shareholder-driven management team and its prospects for taking market share and delivering above-average growth over time," RBC Capital analysts wrote in a Oct.18 report following the results.

KBW analysts rate the stock a market perform with a price target of $7.50.

Seven analysts rate the stock a buy or outperform while seven others rate it a hold.

>>To see these stocks in action, visit the 5 Bank Stocks That Could Jump on 2012 M&A portfolio on Stockpickr.

--Written by Shanthi Bharatwaj in New York

>To contact the writer of this article, click here: Shanthi Bharatwaj.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
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