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3 Top Picks in Regional Banks: Oppenheimer

Stocks in this article: KEY FMER PVTB

KEY Chart KEY data by YCharts

1. KeyCorp

Shares of KeyCorp (KEY) of Cleveland closed at $9.91 Monday, returning 18% this year, following a 12% return during 2012. The shares trade just above tangible book value, and for 10.3 times the consensus 2014 EPS estimate of 96 cents. The consensus 2013 EPS estimate is 88 cents.

The company on April 18 announced the estimated after-tax gain on its pending sale of Victory Capital Management and Victory Capital Advisors would be in the range of $145 million and $155 million. The sale is expected to be completed in the third quarter.

KeyCorp in March announced that the Federal Reserve had approved its plan for share repurchases of up to $426 million through the first quarter of 2014, and that it had been approved to apply the gain on the Victory Capital sale toward additional repurchases.

The company was granted approval to raise its quarterly dividend on common shares to 5.5 cents from 5 cents, subject to board of directors approval, which is expected in May. Based on the current payout, the shares have a dividend yield of 2.02%.

KeyCorp reported first-quarter net income from continuing operations attributable to common shareholders of $196 million, or 21 cents a share, increasing from $190 million, or 20 cents a share, in the fourth quarter, and $195 million, or 20 cents a share, in the first quarter of 2012.

The company said it expected its "Fit for Growth" cost-cutting plan to produce annual savings of $200 million by the end of 2013.

Please see TheStreet's earnings coverage for a detailed review of KeyCorp's first quarter results.

McEvoy on April 18 reiterated his $11 price target for KeyCorp, saying in a note to clients that "while boring on the surface, KeyCorp remains in strong position to outperform its peers as the company successfully reduces operating expenses and repurchases shares."

"We see positive earnings growth in '14 and believe the stock remains undervalued at under 10x our '14 estimate and 0.97x tangible book value," he wrote.

McEvoy estimates KeyCorp will earn 87 cents a share this year, with EPS rising to $1.00 in 2014.

Interested in more on KeyCorp? 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 TheStreet.com 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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