This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

3 A-Rated Bank Stocks

NEW YORK ( TheStreet) -- Most bank stock coverage is rightly centered on the volatility for the largest sector players this year, but investors should also consider smaller, steadier players for a portion of their long-term portfolios.

TheStreet Ratings has assigned A (Excellent) ratings to just three mid-cap or large-cap bank stocks, although many more have "recommended" ratings of B+ (Good) or higher.

Rather than just considering 12-month price targets, based on earnings estimates, capital levels and various market and environmental risks, the way most sell-side analysts do, TheStreet Ratings places its emphasis on long-term total returns, as well as revenue trends and capital strength and dividends, while also considering short-term performance, financial stability and volatility.

With the sector's recent downturn -- centered around JPMorgan Chase (JPM) CEO James Dimon's disclosure on May 10 of a $2 billion second-quarter hedge trading loss -- the largest U.S. banks were trading at historically low multiples to book value and forward earnings estimates, as of Tuesday's market close.

The multiples for the "big three" are certainly attractive for investors who can handle the volatility associated with numerous political and regulatory headwinds for the group, Bank of America's (BAC) legacy mortgage mess, and JPMorgan's unfolding hedge loss drama, which includes the suspension of the company's share buyback program, investigations by several federal regulators, and upcoming Senate hearings.

  • Shares of Citigroup (C) closed at $26.92 Tuesday, returning 2% year-to-date, following a 44% decline during 2011. The stock's five-year total return was a negative 94%, according to Thomson Reuters Bank Insight. Citigroup's shares were trading for just over half their tangible book value, and for six times the consensus 2013 earnings estimate of $4.68 a share, among analysts polled by Thomson Reuters.
  • Shares of Bank of America closed at $6.98 Tuesday, returning 26% year-to-date, following last year's 58% drop. The five year total return was a negative 84%. The shares traded for 0.6 times tangible book value, and for seven times the consensus 2013 EPS estimate of $1.04.
  • JPMorgan Chase closed at $34.01 Tuesday, returning 4% year-to-date, following a 20% decline during 2011. The five-year total return was a negative 21%. The shares traded for 1.1 times tangible book value, and for six times the consensus 2013 EPS estimate of $5.43.

In contrast, the three A-rated bank stocks discussed below were trading for at least 1.6 times tangible book value, and at least 12 times forward earnings.

But the five-year total returns for these three names also stand in sharp contrast to the largest three U.S. banks, ranging from 27% to 87%. The group has also seen much stronger earnings performance over the past five quarters than "the big three."

Here are the three bank stocks assigned "A" ratings by TheStreet Ratings, in no particular order:

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,279.74 +13.75 0.08%
S&P 500 2,010.40 -0.96 -0.05%
NASDAQ 4,579.7890 -13.6380 -0.30%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs