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5 'Best' Bank Stock Ideas from Sterne Agee

4. The Bancorp
Shares of The Bancorp (TBBK) of Wilmington, Del., closed at $9.39 Monday, returning 30% year-to-date, after declining 29% during 2011.

The shares trade for 1.1 times tangible book value, and for 11 times the consensus 2013 EPS estimate of 87 cents. The consensus 2012 EPS estimate is 51 cents.

Sterne Agee's price target for The Bancorp is $11, implying 17% upside for the shares.

The Bancorp specializes in prepaid cards, and with total assets of $3.2 billion as of June 30, the company is exempt from the Durbin Amendment's cap on debit card interchange fees, which the Federal Reserve implemented for banks with over $10 billion in total assets, in October 2011.

Sterne Agee analyst Matthew Kelley on Monday said that The Bancorp was one of his firm's "favorite small cap growth stocks in the financial sector," with operating revenue "expected to increase by 25% and 23% in 2012 and 2013," while fee income from prepaid cards "is expected to grow by 49% and 29% in 2012 and 2013 and will represent 33% and 35% of revenues, up from 28% in 2011."

Looking ahead, Kelley said that "with EPS growing at a 50% [compounded annual growth rate] over the next two years, [tangible book value] expected to grow to $10+ p/s and ROE expected to move into double digits, we believe the shares can trade at a higher P/E valuation in the coming quarters."

The analyst estimates that The Bancorp will earn 98 cents a share in 2013.

TBBK Chart TBBK data by YCharts

Interested in more on The Bancorp? See TheStreet Ratings' report card for this stock.
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