This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

2 Bank Stock Book Value Bargains

Stocks in this article: BAC C GS

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), 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) 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

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
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!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs