Bank of America: Euro Baby Steps Winner

NEW YORK (TheStreet) -- Bank of America (BAC) was the winner among the largest U.S. financial names on Friday, with shares rising 6% to close at $8.18.

The Dow Jones Industrial Average rose over 2%, while the S&P 500 (SPX.X) rose 2.5% and the NASDAQ Composite index ended the month by rising 3%, as investors showed their relief after European leaders agreed to use the European Stability Mechanism to recapitalize troubled banks, without increasing member nations' sovereign debt.

During the European summit, leaders also unveiled a $149 billion economic growth plan for the eurozone, but there was no mention of any agreement on the "stronger EMU architecture" suggested earlier this week by top eurozone officials led by European Council president Herman Van Rompuy, for centralized supervision of banks, and closer coordination of eurozone member nations' budget processes.

The KBW Bank Index (I:BKX) rose 3% to close at 45.79, with 22 out of 24 index components showing gains for the session.

Bank of America's shares have now returned 47% year-to-date, after dropping 58% during 2011.

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 98 cents a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is 58 cents.

Bank of America is set to report its first-quarter results on July 18. While the company would have preannounced any major change to its mortgage repurchase provisions, in light of its ongoing dispute with Fannie Mae (FNMA) over the government-sponsored mortgage giant's mortgage loan putback demands , investors will be looking for further clarity from CEO Brian Moynihan on the company's ultimate plan to settle its legacy expenses from the disastrous acquisition of Countrywide Financial in 2008.

First Horizon National (FHN) announced a dramatic increase of its mortgage putback reserves on Monday.

The consensus among analysts is for Bank of America to post second-quarter earnings of 16 cents a share.

Deutsche Bank analyst Matt O'Connor on Friday lowered his second-quarter earnings estimate for Bank of America by four cents, to 15 cents a share, on expectations of "weaker 2Q trading revenue and additional negative impact from premium amortization/hedging (given lower rates in 2Q)," but remains ahead of the consensus, estimating the company will earn 69 cents for all of 2012. The analyst also lowered his 2013 EPS estimate by a dime to $1.01, "to reflect our more conservative outlook on cost reductions."

O'Connor has a neutral rating on Bank of America.

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

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-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.