This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Regional Banks Stocks Rise Despite EPS Projections (Update 1)

Updated from 7:00 a.m. ET with comments from BMO Capital Markets analyst Peter Winter.

NEW YORK ( TheStreet) -- As large regional banks report earnings over the next two weeks, analysts aren't likely to hike their earnings estimates. Investors, on the other hand, probably won't care.

Even though 2014 earnings estimates for many banks have risen very little or even dropped this year, share prices have steadily climbed, with the KBW Bank Index (I:BKX) up 23% through Friday, following a 30% return for the index during 2012.

What has happened is the market's valuation of bank stocks relative to book value and earnings estimates has risen as investors have grown much more comfortable with the notion of a much stronger banking sector.

For example, shares of SunTrust (STI - Get Report) on Jan. 3 closed at $28.40. The shares at that time traded for 1.1 times their reported Sept. 30, 2012 tangible book value of $25.72, and 9.5 times the consensus 2014 earnings estimate at that time of $3.00 a share, among analysts polled by Thomson Reuters.

Based on Friday's closing price of $32.99, SunTrust's shares now trade for 1.3 times their reported June 30 tangible book value of $26.08, and for 11.2 times the consensus 2014 EPS estimate of $2.95.

So SunTrust's shares rose 16% from Jan. 3 through Friday, with the forward price-to-earnings ratio rising significantly, even though analysts' opinion about the company's earnings prospects for 2014 soured slightly.

Bank of America (BAC - Get Report) also underlines investors' rising confidence for most of the big banking players. The company's shares closed at $14.05 Friday and traded for 1.1 times their reported June 30 tangible book value of $13.32 and 10.3 times the consensus 2014 EPS estimate of $1.36. The shares have returned 21% this year.

Bank of America's closing price at the end of 2012 was $11.58. At that time, the shares traded at much lower multiples of 0.9 times their Sept. 3, 2012 reported tangible book value of $13.48 and 9.3 times the then-consensus 2014 EPS estimate of $1.25. Rising home prices and lower expenses related to problem loans and repossessed real estate, as well as other efficiency gain through CEO Brian Moynihan's "Project BAC," have greatly boosted investors' confidence in the stock.

Please see TheStreet's Big 4 Bank Earnings Preview for more on the difficult third-quarter earnings comparisons ahead for Bank of America, JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C).
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BAC $15.52 0.00%
HBAN $10.74 -1.10%
KEY $13.03 -0.91%
RF $8.98 -1.10%
STI $39.31 -0.63%


Chart of I:DJI
DOW 17,081.89 -49.97 -0.29%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,796.6090 -42.0340 -0.87%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs