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3 Bank Stocks to Sell From JPMorgan

Astoria Financial
Shares of Astoria Financial (AF - Get Report) of Lake Success, N.Y., closed at $10.00 Tuesday, returning 20% year-to-date, following a 36% decline during 2011.

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The shares trade for 0.9 times tangible book value, according to HighlineFI, and for 15 times the consensus 2013 EPS estimate of 65 cents. The consensus first-quarter EPS is 12 cents, with a full-year 2012 estimate of 53 cents.

Based on a quarterly payout of 13 cents, the shares have dividend yield of 5.20%.

The company had $17 billion in total assets as of Dec. 30.

Astoria has suffered in the prolonged low-rate environment, with its net interest margin -- the difference between a bank's average yield on loans and investments and its average cost for deposits and wholesale borrowings -- narrowing to 2.20% during the fourth-quarter, from an already low 2.32% a year earlier.

Alexopoulos on Wednesday raised his price target for Astoria by a dollar, to $9.00. The analyst estimates that Astoria will post core first-quarter earnings of 11 cents, followed by EPS of 50 cents for all of 2012, and 2013 EPS of 56 cents.

The analyst said that "despite strong pipelines in both multifamily and 1-4 family categories, loan originations will likely be offset by AF selling production given continued low mortgage rates," and that he expects the net interest margin "to contract another 7 bps to 2.13% as asset yield pressure more than offsets an expected 3 bps reduction in CD costs."

While saying that "we applaud management's efforts to maintain a flat level of expenses in 2012," Alexopoulos reiterated his "Underperform" rating for Astoria, "given anticipated headwinds, we continue to see profitability levels not only remaining well below peers in 2012, but also well below its cost of capital."

Interested in more on Astoria Financial? See TheStreet Ratings' report card for this stock.

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AF $13.06 -0.50%
BAC $16.02 1.30%
BXS $22.50 0.49%
C $53.21 1.50%
TRMK $23.30 1.10%


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