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4 Banks to Buy Now from JPMorgan

Stocks in this article: BAC WFC USB STI PNC

2. PNC Financial Services Group

Shares of PNC Financial Services Group (PNC) of Pittsburgh closed at $61.91 Tuesday, returning 7%, following a 3% return during 2012. PNC significantly underperformed peers last year, when the KBW Bank Index rose 25%. However, the shares only declined by 3% during 2011. The stock's total return since the end of 2010 through Tuesday's close, was 7%.

PNC's stock trades for 0.9 times tangible book value, and for 9.1 times the consensus 2014 EPS estimate of $6.83. The consensus 2013 EPS estimate is $6.54.

Based on a quarterly payout of 40 cents, the shares have a dividend yield of 2.58%.

Juneja's price target for PNC's shares is $72.50, and the analyst estimates the company will earn $6.58 in 2013, with EPS increasing to seven dollars in 2014.

PNC reported 2012 net income attributed to common shareholders of $2.8 billion, or $5.30 a share, declining from $3.0 billion, or $5.64 a share, in 2011. Revenue gains were outweighed by increases in noninterest expenses, while earnings available to common shareholders were lowered by increased dividends on preferred shares. The company in March completed its $3.5 billion acquisition of RBC Bank (USA), adding over 400 branches in the Southeast.

PNC holds a 22% "economic interest" in BlackRock (BLK). While PNC's revenue from its BlackRock stake was $1.1 billion in 2012, the bank's income from the BlackRock stake was only $3 million.

Juneja said that his "overweight" rating for PNC was based on attractive valuation and "multiple drivers of revenue growth," as the company expands its business through the branches acquired from RBC and through the acquisition of the distressed National City Corp. in October 2008.

The company is "actively growing fee based businesses including capital markets and treasury management as well as consumer businesses such as credit cards," he said.

Juneja added that PNC was trading in line with multiples for its peers, but said that "our target multiple reflects our belief that it should be trading closer to high quality banks given its track record of good revenue growth and conservative risk profile."

PNC Chart PNC data by YCharts

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

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