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Stocks Under $10 with 50-100% upside potential - 14 days FREE!

8 Post-Downgrade Bank Stock Bargains

Stocks in this article: BAC C MS KEY STI GS ZION CMA I:BKX

2. Bank of America
Shares of Bank of America (BAC) closed at $7.94 Friday, returning 43% year-to-date, after dropping 58% last year.

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The shares trade for 0.6 times their reported March 31 tangible book value of $12.87, and for eight times the consensus 2013 earnings estimate of $1.01 a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is 60 cents.

Guggenheim Securities analyst Marty Mosby last Tuesday reiterated his "Buy" rating for Bank of America, with an $11 price target, saying the company's "franchise value less incremental losses places BAC's inherent value between $11 and $17 a share," even "after absorbing close to $100 billion of losses from its mortgage overhang issues, representing at least 40% upside potential."

Mosby said that "BAC could still lose from $30 billion to $90 billion over the next several years," from mortgage putbacks springing from the company's purchase of Countrywide Financial in 2008, but "even if we assume these losses are netted against tangible book value today, we still estimate BAC's worst case franchise value to be around $11 and a base case franchise value of $17, representing 40% and over 100% upside potential, respectively."

The analyst is out in front of the consensus, estimating that Bank of America will earn 75 cents a share this year, followed by EPS of $1.10 in 2013.

Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.

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