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5 Expensive Bank Stocks Still Worth Buying (Update 3)

Stocks in this article: BAC C JPM WFC USB CYN TCBI OZRK INDB

Updated with market close information.

NEW YORK ( TheStreet) -- For financial-stock investors, it can pay to step back and focus on actual success, rather than just looking for cheap prices in a recovering industry.

TheStreet has identified five quality banks showing strong asset growth over the past year, along with sequential and year-over-year net revenue growth.

These companies aren't cheap, but you get what you pay for, and quality names could be just the ticket for the more conservative portion of a diversified portfolio.

Despite weakness this week as investors worry over Greece and an expected mortgage settlement between the largest mortgage servicers -- including Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC), Citigroup (C) and Ally Financial -- we're in the midst of a major bank-stock rally, with the KBW Bank Index (I:BKX) returning 14% this year through Monday's close.

Bank of America has been the bank-stock star, with shares rising 46% year-to-date, through Wednesday's close at $8.13, after dropping 58% in 2011.

The shares of the second-largest U.S. bank holding company (JPMorgan Chase is in the lead, with $2.3 trillion in total assets as of Dec. 30, followed by Bank of America, with $2.1 trillion) are still cheaply priced, at 0.7 times tangible book value, according to HighlineFI, but with the recovery in the share price and a slew of earnings estimate cuts by analysts, the shares now trade for 11 times the consensus 2012 EPS estimate of 72 cents, among analysts polled by Thomson Reuters.

Investors looking for bargains need to know that rest of the "big four" trade at cheaper multiples to forward earnings:

  • Shares of Citigroup closed at $34.25 on Wednesday, rreturning 30% in 2012. Like Bank of America, the shares trade for just 0.7 times tangible book value, but they also trade at a much lower multiple of nine times the consensus 2012 EPS estimate of $3.99.
  • JPMorgan Chase closed at $38.30 Wednesday, returning 16% year-to-date. The shares trade for 1.2 times tangible book value, and eight times the consensus 2012 EPS estimate of $4.67. With JPM, you also have a respectable dividend yield of 2.61%, based on a 25-cent quarterly payout.
  • Wells Fargo's shares returned 12% through Wednesday's close at $30.63. The shares traded for 1.7 times tangible book value -- reflecting the company's status as the most consistent earner among the big four over the past year -- and for 10 times the consensus 2012 EPS estimate of $3.20. With a quarterly payout of 12 cents, the shares have a dividend yield of 1.57%.

For Bank of America, quite a bit is riding on the mortgage settlement, as well as the improving prospects for the U.S. economy as the unemployment reports continue to improve.

Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.

To come up with our list of five bank holding companies showing year-over-year revenue growth, we began with actively traded companies reporting the largest year-over-year increases in fourth quarter net revenue, which we defined as net interest income (tax-adjusted if available) plus noninterest income, less noninterest expense. In order to look beyond the distortion to revenue and earnings results from the release of loan loss reserves, these were excluded.

Very few of the holding companies showed both sequential and year-over-year revenue growth.

We further narrowed down the list to companies also showing quarter-over-quarter net revenue growth, and also those achieving returns on average assets (ROA) of at least 0.70%, over the past five quarters.

All data was provided by HighlineFI, using market close information from Monday.

Here they are, by ascending year-over-year net revenue growth.

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