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6 Bank Stock Picks for Earnings Season From FBR

Webster Financial
Shares of Webster Financial (WBS - Get Report) of Waterbury, Conn., closed at $21.44 Friday, returning 5% year to date, following a 4% return during 2011.

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The shares trade for 1.4 times tangible book value and for 12 times the consensus 2013 earnings estimate of $1.80 a share. The consensus 2012 EPS estimate is $1.72.

Webster reported first-quarter net income available to common shareholders of $38.3 million, or 42 cents a share, coming in ahead of the consensus estimate of 40 cents. In comparison, the company reported earnings to common shareholders of $39.6 million, or 43 cents a share, the previous quarter, and $33.8 million, or 36 cents a share, a year earlier.

While a sequential increase in expenses caused a slight dip in earnings from the previous quarter, Webster's mortgage banking income increased to $4.4 million during the first quarter, from $1.1 million in the fourth quarter, and $1.3 million in the first quarter of 2011.

FBR analyst Bob Ramsey rated Webster Financial outperform with a $27 price target, and said last Tuesday that first-quarter trends were "generally in line with expectations, with some upside from strong mortgage banking," and that the company "reported positive operating leverage, and its efficiency ratio continued to improve, edging it closer toward its goal of 60% operating efficiency by 4Q12."

Ramsey noted that Webster's management will "request a dividend increase at next week's board meeting, stated that buybacks are 'only a matter of time,' and downplayed the likelihood of M&A."

Webster is currently paying a quarterly dividend of a nickel a share.

FBR estimated the company will earn $1.75 this year, followed by 2013 EPS of $1.95.

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

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