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Bank of America Analyst 'Conviction Buy' After 110% Gain in 2012

Stocks in this article: BAC WFC

NEW YORK ( TheStreet) -- Bank of America (BAC)has been added to Evercore's "conviction list," and is its top pick large-cap bank for 2013 despite a 110% run-up in 2012.

"It has the greatest identifiable levers, largest upside to 'norm' earnings power, and attractive valuation," writes analyst Andrew Marquardt.

Explaining why he is recommending a stock after it more than doubled over the previous year, he notes the shares at the time were "near all-time lows" and trading at just 40% of tangible book value on fears it would need to raise additional capital. He argues those fears are now convincingly in the rear view mirror and that the bank will be allowed to start "deploying" capital in 2013 via share buybacks and/or dividend increases. He also expects investors to begin focusing on the bank's earnings potential, which he sees as $1.69 per share under "normal circumstances, or 70% above consensus 2013 estimates.

Similar to other bank stock watchers, such as hedge fund manager Tom Brown of Second Curve Capital and Richard Staite, analyst with Atlantic Equities, Marquardt cites abundant cost cutting opportunities at Bank of America. He also forecasts "liability repricing," of $1.25 per share--essentially a bet on an improving economy and housing market.

Bank of America "essentially replaces" Wells Fargo as Evercore's top large cap bank. Evercore's analysts downgraded Wells Fargo last month largely due to concerns over shrinking net interest margins, with fewer opportunities than peers to offset those factors through cost cuts.

Bank of America shares were set to open more than 3% higher ahead of Wednesday's market open, following a Congressional budget deal that appears likely to drive a broad-based market rally.

-- Written by Dan Freed in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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