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5 Cheapest A-Rated Bank Stocks


Shares of Pacific Premier Bancorp (PPBI) of Irvine, Calif., closed at $14.13 Monday and traded for 12.4 times the consensus 2014 EPS estimate of $1.14. The company's ROTCE for the first three quarters of 2013 was 11.19%, down from 11.96% in 2012 and 12.48% in 2011. This year's performance has reflected higher provisions for loan losses, mainly to cover loans acquired through the purchase of failed banks from the Federal Deposit Insurance Corp.

Wells Fargo (WFC) closed at $43.41 Monday. The shares trade for 10.8 times the consensus 2014 EPS estimate of $4.01.

Wells Fargo has consistently outperformed the other members of the "big four" U.S. banking club, which also includes JPMorgan Chase (JPM), Bank of America (BAC) and Citigroup (C). The company's ROTCE for the first three quarters of 2013 was 17.86%, increasing from 16.70% in 2012 and 16.50% in 2011.

Despite the strong performance and much lower level of regulatory pressure than JPMorgan Chase and Bank of America, Wells Fargo is not the most expensive stock among the "big four" on a forward P/E basis. That prize goes to Bank of America, with shares trading for 11.1 times the consensus 2014 EPS estimate of $1.34, based on Monday's closing price of $14.92. BAC's ROTCE for the first three quarters of 2013 was 7.44%, which was a major improvement from 2.96% in 2012 and 1.08% in 2011. Bank of America is rated a C-plus (Fair) by TheStreet Ratings.

The cheapest actively traded A-rated bank stock on a forward P/E basis is Capital One Financial (COF). The stock closed at $69.42 Monday and traded for 10.0 times the consensus 2014 EPS estimate of $6.96. The company's ROTCE for the first three quarters of 2013 was 17.02%, improving from 14.64% in 2012 and 20.35% in 2011. The relatively weak performance during 2012 reflected extraordinary credit expenses following Capital One's purchase of HSBC's (HBC) U.S. credit card portfolio.


-- 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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