The KBW Bank Index (I:BKX) was down 1% to close at 56.31, with all but six of the 24 index components showing declines.
Bank of America
Shares of Bank of America (BAC) were down slightly to close at $12.23. The shares have returned 5% this year, following a 110% return during 2012. The shares trade for 0.9 times their reported Dec. 31 tangible book value of $13.36, and for 9.4 times the consensus 2014 earnings estimate of $1.30, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is 98 cents.
Atlantic Equities analyst Richard State said Wednesday the continued strengthening of the U.S. housing market supports "at least 40% upside" for Bank of America's shares, as rising home prices drive "lower operating costs, lower provision costs and increased capital return." The provision costs refer to additions to loan loss reserves, as well as reserves for mortgage repurchase claims.
Staite expects Bank of America's earnings per share to rise "towards $2.00 by 2016," as legacy mortgage costs decline, funding costs decline and the company continues to repurchase shares.
The analyst rates Bank of America "overweight," with a 12-month price target of $14.70, but sees further upside to a price of $17.20 by the end of 2014, as the shares trade up to a multiple of 1.1 times tangible book value.-- Written by Philip van Doorn in Jupiter, Fla. >Contact by Email. Follow @PhilipvanDoorn
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