NEW YORK ( TheStreet) -- JPMorgan analyst Steven Alexopoulos said on Wednesday that bank stock investors should consider locking in gains, heading into first-quarter earnings season, and named three stocks he would "avoid."
The analyst said that "with bank stocks above fair value," it was " a good time to lock in gains in front of the mediocre 1Q12 ahead."
Bank stocks have had an amazing run so far this year, with the KBW Bank Index (I:BKX) rising 27% year-to-date through Tuesday's close at 49.90, following a 25% drop during 2011.
Two of the largest U.S. bank holding companies are still trading at sharp discounts to book value and very attractive price multiples to forward earnings estimates, despite runaway year-to-date returns:
- Shares of Bank of America (BAC - Get Report) closed at $9.49 on Tuesday, returning 71% year-to-date, following an epic 58% decline during 2011. The shares still trade for just 0.7 times the company's Dec. 30 tangible book value of $12.95, and for a relatively low nine times the consensus 2013 EPS estimate of $1.06, among analysts polled by Thomson Reuters. The consensus first-quarter EPS estimate for BAC is 12 cents, with a full-year 2012 estimate of 68 cents.
- Citigroup (C - Get Report) closed at $36.37 Tuesday, returning 38% year-to-date, following last year's 44% decline. Like Bank of America, Citi's shares are heavily discounted, at just 0.7 times the Dec. 30 tangible book value of $49.81. The shares trade for eight times the consensus 2013 EPS estimate of $4.70. Analysts expect the company to post first-quarter EPS of 99 cents, and EPS of $4.08 for all of 2012.