As large U.S. banks continued to announce their fourth-quarter results, KBW Bank Index (I:BKX) was down slightly to close at 53.48. When speaking about Bank of America (BAC - Get Report), with shares rising over 100% last year, Jim Cramer said it was time for investors to "scale back" on the "very crowded money center play," and rotate to the stronger regional banks. Cramer said that KeyCorp (KEY) "may be the most undervalued stock that we own" for the Action Alerts Plus charitable portfolio.
"Find a regional you are comfortable with," Cramer said, and "unwind the trade of long money center/short regional."
Shares of Bank of America were down over 1% to close at $11.14.
"Seasonal Patterns," but Lower 2013 Guidance
Following Thursday's market close, Capital One reported fourth-quarter net income available to common stockholders of $825 million, or $1.41 a share, missing the consensus estimate of $1.59, among analyst polled by Thomson Reuters. In comparison, the company earned $1.173 billion, or $2.05 a share, in the third quarter, and $381 million, or 89 cents a share, in the fourth quarter of 2011, when Capital One incurred unusually high expenses at it prepared for its first-quarter acquisition of ING Direct (USA). Capital One CFO Gary Perlin attributed the sequential earnings decline to "seasonal expense and margin trends," but also said that "with a few exceptions largely related to these seasonal patterns, fourth quarter 2012 results give us a good picture of what to expect in terms of pre-provision earnings in 2013, assuming little change in the external environment." The company's fourth-quarter revenue was $5.624 billion, declining from $5.782 billion in the third quarter, "almost entirely driven by higher levels of estimated uncollectible finance charges and fees in the company's Domestic Card business." Capital One's fourth-quarter provision for loan losses was $1.151 billion, increasing from $1.014 billion the previous quarter, and $861 million a year earlier. The company said that the provision increased form the third quarter because fewer nonperforming loans acquired through acquisitions were absorbed by credit marks previously taken.