This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
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

2 Bank Stock Book Value Bargains

NEW YORK ( TheStreet) -- Sell-side analysts usually steer clear of hanging their bank stock picks on book value these days, but there are still some large banks that look exceedingly cheap on this basis.

There was a time, only a couple of years back, when investors with long-term horizons could easily scoop up big bank stocks trading just above half tangible book value. Depending on the timing of an investment, this approach netted huge gains for mediocre but grossly undervalued money center banks, such as Bank of America (BAC - Get Report), whose stock returned 110% during 2012.

Bank of America's stock has returned 21% this year, through Wednesday's close at $13.96. That's just above the company's reported Sept. 30 tangible book value of $13.62 a share.

Many analysts and investors prefer at this point to focus on forward price-to-earnings ratios. Bank of America's shares trade for 10.2 times the consensus 2014 earnings estimate of $1.34 a share, among analysts polled by Thomson Reuters.

Considering BAC's rather low returns on average tangible common equity (ROTCE) -- 6.97% in the third quarter, improving from 0.95% a year earlier, according to Thomson Reuters Bank Insight -- the stock looks rather expensive on a forward price-to-earnings basis. Discover Financial (DFS), for example, trades at the same forward P/E as Bank of America, and its third-quarter ROTCE was 24.30%, declining from 25.00% a year earlier.

Please see TheStreet's Discover Tops List of Cheapest Banks With Greatest Returns for a discussion of the bank stocks with high ROTCE trading at lowest forward P/Es.

Big Bank Book Value Picks

Shares of Citigroup (C - Get Report) closed at $48.62 Wednesday and traded for 0.9 times their reported Sept. 30 tangible book value of $54.52. The stock is also quite cheap on a forward P/E basis, trading just below nine times the consensus 2014 EPS estimate of $5.43.

Citigroup's recovery continues, as the company's runoff assets in the "bad bank" subsidiary Citi Holdings declined 29% year-over-year to $122 billion as of Sept. 30 and represented just 6% of total assets.

Regulatory capital keeps building, and KBW's analyst team earlier this week estimated that Citi will be approved for $7.686 million in common share buybacks following the Federal Reserve's 2014 stress tests in March.

1 of 3

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
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BAC $15.41 0.13%
C $51.62 0.19%
AAPL $124.25 -0.14%
FB $81.66 -0.67%
GOOG $542.56 -0.99%

Markets

DOW 17,698.18 -77.94 -0.44%
S&P 500 2,059.69 -8.20 -0.40%
NASDAQ 4,880.2280 -20.6570 -0.42%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs