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

4 Banks to Buy Now from JPMorgan

Stocks in this article: BAC WFC USB STI PNC

1. Bank of America

Shares of Bank of America closed at $11.49 Tuesday, down 1% year-to-date. The shares returned 110% during 2012, following an epic decline of 58% during 2011. The shares were still down 13% from the end of 2010 through Tuesday's close.

The shares trade for 0.9 times tangible book value, and for nine times the consensus 2013 EPS estimate of $1.28. The consensus 2013 EPS estimate is 97 cents.

Juneja has a price target of $13.50 for Bank of America, and is out in front of the consensus, estimating the company will earn $1.09 a share in 2013, with earnings growing to $1.41 a share in 2014.

Please see TheStreet's earnings coverage for details on Bank of America's messy fourth-quarter, which included a large mortgage putback settlement with Fannie Mae (FNMA), along with participation in the $8.5 billion foreclosure settlement with federal regulators.

Juneja said that his firm's "overweight" rating for Bank of America reflects a "relatively attractive valuation," as well as the potential benefits from the housing recovery and "position as a leading retail and commercial banking franchise in the U.S."

The company's "normalized earnings should benefit from large cost cutting program under way, faster reduction in the very large legacy asset servicing and other credit related expenses as the housing market continues to improve, and decline in litigation expenses," Juneja said said.

"There has been some good progress on mortgage related issues," he said, noting Bank of America's sizable additional reserves," for mortgage repurchase demands. These reserves totaled $19 billion as of Dec. 31.

Bank of America has also achieved compliance with its likely Basel III capital requirement, many years ahead of the full implementation of the enhanced capital rules in January 2019. The company's estimated Basel III Tier 1 common equity ratio was 9.25% as of Dec. 31.

BAC Chart BAC data by YCharts

Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.

-- Written by Philip van Doorn in Jupiter, Fla.

>Contact by Email.

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.
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