3. U.S. Bancorp
The company on Friday purchased the failed BankEast of Knoxville, Tenn., from the FDIC, picking up 10 branches and roughly $269 million in deposits.The Minneapolis lender reported fourth-quarter earnings of $1.35 billion, or 69 cents a share, improving from $1.27 billion, or 64 cents a share, during the third quarter, and $974 million, or 49 cents a share, during the fourth quarter of 2010. The company has been one of the strongest earnings performers among regional banks, with its ROA increasing from 1.37% in the fourth quarter of 2010 to 1.61% in the most recent quarter, according to HighlineFI. Please see TheStreet's detailed earnings coverage for more on U.S. Bancorp's fourth-quarter results. During the fourth quarter, the company repurchased 6 million shares under its 50 million share authorization. CEO Richard Davis said on Jan. 18 when the company announced its fourth-quarter results that following the stress tests, U.S. Bancorp was looking "forward to moving closer to our long-term goal of returning a majority of our earnings to shareholders in the form of dividends and buybacks," and that "raising the dividend is a top priority for our senior management and Board of Directors, and our shareholders deserve to be rewarded for their investment in our Company." U.S. Bancorp certainly has plenty of room to raise the dividend significantly. J.P. Morgan analyst Vivek Juneja on Jan. 20 reiterated his "Overweight" rating for USB, with a price target of $35.50, saying "favorable business mix, growth in some revenues, including investment banking, above-average earnings and tangible book value growth and defensive role in times of economic uncertainty," and that "in addition, USB is likely buying back stock given strong capital ratios." KBW analyst Greg Ketron on Wednesday reiterated his "Buy" rating on U.S. Bancorp, with a $35 price target, and said "USB has the most optimal banking model for the current environment and has a proven track record of best in group performance and return metrics," and that "owning USB over the past ten years would have earned investors the top return in the group." Ketron said that KBW's own stress test analysis indicates that U.S. Bancorp "is positioned for the highest return of capital in 2012," with $9 billion in excess Tier 1 common equity. "Given USB's history of 80%+ payouts, we expect an increase in the div yield to 3%," he said. The shares trade for 2.6 times tangible book value, and for 10 times the consensus 2012 EPS estimate of $2.68. While the price-to-book ratio is quite a premium to other large regional bank stocks, the forward P/E is not such a high premium, and with USB, you have the "gold standard" among regional banking names, with earnings performance through thick and thin. Interested in more on U.S. Bancorp? See TheStreet Ratings' report card for this stock.