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

5 Bank Stocks Ready to Rise With the Housing Recovery: UBS

Stocks in this article: BAC USB ZION CMA CYN UMPQ

4. U.S. Bancorp

Shares of U.S. Bancorp (USB) of Minneapolis closed at $32.10 Tuesday, returning 21% year-to-date, following a 2% return last year.

The shares trade for 2.6 times tangible book value, and for 10.4 times the consensus 2013 EPS estimate of $3.08. The consensus 2014 EPS estimate is $3.32. Based on a quarterly payout of 19.5 cents, the shares have a dividend yield of 2.43%.

U.S. Bancorp placed fifth in the UBS bank footprint ranking, with weighted home price growth rate of 5.24% in its market footprint.

U.S. Bancorp has been one of the strongest and most consistent earners among large U.S. banks, with operating returns on average assets (ROA) increasing steadily from 1.58% to 1.71% over the past five quarters, according to Thomson Reuters Bank Insight. The strong performance is reflected in the relatively high price-to-tangible-book ratio.

Ketron rates U.S. Bancorp a "Buy," with a $38 price target, saying on Oct. 17 after the company announced its third-quarter results that "the bank continues to post above average returns, was able to maintain its net interest margin, or NIM while there has been sharp contractions at peers, and has had above average loan growth."

The analyst added that "operating trends were positive across the board, and only slightly missed our estimate of $0.75 due to a higher than expected loan loss reserve provision."

USB set aside $488 million for credit losses during the third quarter, increasing from $470 million the previous quarter, but declining from $519 million a year earlier. The company said in its earnings release that its third-quarter loan losses "included $54 million of incremental charge-offs due to a regulatory clarification." Despite the increase in charge-offs, the company still added less to reserves than it charged-off, "releasing" $91 million in loan loss reserves, which boosted earnings.

Ketron estimates that U.S. Bancorp will earn $3.10 a share in 2013, followed by EPS of $3.40 in 2014.

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

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