4. State Street
of Boston closed Monday at $43.91, returning 10% year-to-date, following an 11% decline last year.
The shares trade for 1.8 times tangible book value, and for 10 times the consensus 2013 EPS estimate of $4.31. The consensus 2012 EPS estimate is $3.85.
Based on a quarterly payout of 24 cents, the shares have a dividend yield of 2.19%.
State Street reported second-quarter net income available to common shareholders of $480 million, or 98 cents a share, compared to $417, or 85 cents a share, in the first quarter, and $502 million, or a dollar a share, in the second quarter of 2011. The company's second-quarter return on average common equity was 10.3%, increasing from 8.6% the previous quarter, but and 10.2% a year earlier.
State Street's second-quarter net interest margin was 1.72%, increasing from 1.64% in the first quarter, but declining from 1.76% during the second quarter of 2011. While the company's net interest margin is narrow, fee revenue from the company's core from trust, custody and asset management business made up 73% of total second-quarter revenue, while net interest revenue was only 28% of total revenue.
Mosby estimates that State Street's net interest margin will contract by another nine basis points through the end of 2013.
The analyst rates State Street a "Buy," and on Monday raised his price target for the shares by $55 from $49, "based on our detailed analysis that ties returns on tangible common equity to a relative premium to tangible book value and growth in tangible book value per share."
Mosby said he expected "STT to earn a 15% return on tangible common equity in 2013 with an estimated cost of equity around 10%," and said that "if STT can regenerate revenue growth coupled with some efficiency improvements, the valuations can begin to improve. "
Interested in more on State Street? See TheStreet Ratings' report card for this stock.