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4 Banks to Buy Now from JPMorgan

3. Wells Fargo

Shares of Wells Fargo closed at $35.27 Tuesday, returning 3% year-to-date, following a 27% return during 2012. The shares declined by 10% in 2011, which was strong performance, considering that KBW Bank Index was down 25% that year. The stock's total return from the end of 2010 through Tuesday was 19%.

The shares trade for 1.8 times tangible book value, and for 9.1 times the consensus 2014 EPS estimate of $3.89. The consensus 2013 EPS estimate is $3.64.

Wells Fargo on Jan. 22 raised its quarterly dividend by three cents to 25 cents, for a yield of 2.84% at Tuesday's close. The Federal Reserve had approved the dividend increase last March, as part of the regulator's annual stress test process for the largest U.S. Banks.

JPMorgan's price target for Wells Fargo is $41, and Juneja estimates the company will earn $3.65 a share this year, with earnings increasing to $3.95 in 2014.

Among the "big four" U.S. banks, including Bank of America (BAC - Get Report), Citigroup (C) and JPMorgan Chase (JPM), Wells Fargo was the strongest performer by far during 2012, with quarterly ROA rising from 1.30% in the first quarter, to 1.47% I the fourth quarter. JPMorgan Chase ranked second last year, with quarterly ROA ranging from 0.88% to 1.01%.

Juneja said that his price target for Wells Fargo is "based on 10.4x our 2014 EPS estimate, in line with peer average," and that the current valuation of the shares to his 2014 estimate is also in line with the average.

The analyst said that his positive view for the shares reflects "better fee income growth opportunities with recent acquisitions of loan portfolios, expansion of capital markets and wealth management businesses as well as leading mortgage banking position." Juneja also cited Wells Fargo's cost-control efforts, and the company's "lower international risk and capital markets exposure relative to peers."

WFC Chart WFC data by YCharts

Interested in more on Wells Fargo? See TheStreet Ratings' report card for this stock.
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