Updated with the Federal Reserve's announcement that Morgan Stanley entered into a consent order, to provide remediation to mortgage borrowers.
NEW YORK (
) -- While raising price targets for three of the biggest U.S. banks, KBW analyst David Konrad on late on Monday said that "some profit-taking in the group is recommended" after
(JPM - Get Report)
kicks off first-quarter earnings season on April 13.
Konrad said that "universal bank stocks have been strong this quarter, up 43%, driven by historically low price-to-tangible book value (TBV) ratios, an underweight sector, and increasing estimates," but that he expects "strong results in 1Q12, the results may not meet investor's exceedingly high expectations."
After emphasizing below-book-value picks at the end of last year, the remarkable first-quarter run for bank stocks has some investors looking further down the road, at price multiples to 2013, with the tail-end of the first-quarter run being driven by a slew of earnings estimate increases.
KBW analyst Fred Cannon said last week that "the rally in the large banks and brokers has generally been led by those banks that began the year with the lowest price/book values" -- including
Bank of America
(BAC - Get Report)
(C - Get Report)
-- as the "global 'risk-on' trade supported the cheapest stock on book value." But looking ahead, Cannon said the rally was sustainable "only if leadership in the rally is taken over by firms with positive earnings estimate revisions."
Among the five universal banks covered in KBW's first-quarter preview, JPMorgan Chase was the most expensive to tangible book value, with shares trading for 1.5 times tangible book at Monday's closing price of $46.13, according to HighlineFI.
(GS - Get Report)
was trading just above its Dec. 30 tangible book value, Citigroup and
(MS - Get Report)
both traded at just 0.7 times tangible book, while Bank of America traded for 0.8 times tangible book value.
Konrad on Monday increased his first-quarter 2012 earnings estimates Citigroup, Goldman Sachs, and JPMorgan Chase, because of expected increases in trading and capital markets revenue.
The analyst lowered his 2012 EPS estimate for Morgan Stanley to a net loss of 32 cents, because of "a material [debit valuation adjustment] charge this quarter due to their contracting bond spreads."
Here's a quick look at all five universal banks, with KBW's take versus consensus estimates, along with recommendations and price target revisions, starting with JPMorgan Chase, which will be the first among the group to report its first-quarter results.