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Bank of America Has 37% Upside: Morgan Stanley (Update 2)

According to Graseck, Bank of America will poach mortgage market share from Wells Fargo (WFC - Get Report), "whose market share we already forecast to decline from ~35% at 1Q12 to ~20% by 2016."

"BAC's market share is already up 130 bp from trough levels in 1Q12 to 5.6% in 1Q13; we expect it to rise to ~7% by 4Q13, 8% in 2014, and 10-12% long term, in line with BAC's deposit market share but below BAC's peak market share of 18-20% in 2009-10 post exiting wholesale and correspondent channels," she wrote.

Based on Monday's close, Bank of America's shares were trading for 9.1 times the consensus 2014 earnings estimate of $1.29 a share, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is 97 cents. That's a projected earnings increase of 33% for 2014, which is the highest among the "big four" U.S. banks, although, of course, Bank of America's estimated earnings increase comes from a pretty low base, with a first-quarter return on average assets (ROA) of 0.48% for the first quarter.

Here's how ROA and forward P/E ratios compare for the rest of the big four:
  • Shares of Wells Fargo closed at $36.73 Monday, trading for 9.4 times the consensus 2014 EPS estimate of $3.90. The consensus 2013 EPS estimate is $3.70. The company's first-quarter ROA was a strong 1.49%.
  • Shares of JPMorgan Chase(JPM - Get Report) closed at $$47.35 Monday, trading for 8.0 times the consensus 2014 EPS estimate of 5.93. The consensus 2013 EPS estimate is $5.67. The company's first-quarter return on assets was 1.14%.
  • Citigroup(C - Get Report) closed at $45.15 Monday, trading for 8.5 times the consensus 2014 EPS estimate of 5.31. The consensus 2013 EPS estimate is $4.68. The company's first-quarter ROA was 0.62%.

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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