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!

Big Bank Stocks Are Still Cheap, Says Oppenheimer

Stocks in this article: BAC JPM COF JPM USB WFC I:BKX ^GSPC

NEW YORK (TheStreet) -- Despite a spectacular sector run-up this year, stocks of major U.S. banks are trading at just half their historical average levels to tangible book value, according to Oppenheimer analyst Chris Kotowski.

The KBW Bank Index I:BKX closed at 67.29 Thursday, rising 31% this year.  Here's a quick look at the valuations for the six large-cap banks covered by Kotowski:

  • Shares of JPMorgan Chase (JPM) closed at $57.22 Thursday.  The shares traded for 1.6 times tangible book value, according to Thomson Reuters Bank Insight, and for 9.5 times the consensus 2014 earnings estimate of $6.01 a share.  The consensus 2015 EPS estimate is $6.37.
  • Bank of America (BAC) closed at $15.59 Thursday and traded for 1.2 times tangible book value and 11.6 times the consensus 2014 EPS estimate of $1.34.  The consensus 2015 EPS estimate is $1.60.
  • Citigroup (C) closed at $51.73 Thursday and traded for just below tangible book value and 9.5 times the consensus 2014 EPS estimate of $5.42.  The consensus 2015 EPS estimate is $5.96.
  • Wells Fargo (WFC) closed at $44.08 Thursday and traded for 2.2 times tangible book value and 11.0 times the consensus 2014 EPS estimate of $4.01.  The consensus 2015 EPS estimate is $4.22.
  • U.S. Bancorp (USB) closed at $38.86 Thursday and traded for 3.2 times tangible book value (according to Kotowski) and 12.1 times the consensus 2014 EPS estimate of $3.20.  The consensus 2015 EPS estimate is $3.45.
  • Shares of Capital One Financial (COF) closed at $69.63 Thursday and traded for 1.6 times tangible book value and 10.0 times the consensus 2014 EPS estimate of $6.96.  The consensus 2015 EPS estimate is $7.46.

In a note to clients on Thursday (based on his firm's figures and Wednesday's closing prices), Kowtoski wrote that the large-cap banks covered by his firm were "right in line" with the historical average, with an average forward price-to-earnings ratio of 10.6, which was 72% of the average forward P/E of 14.7 for the S&P 500

But the six big bank stocks stocks trade at just "half their historical level," with an average price-to-tangible-book ratio of 1.8, according to Kotowski.  For the 12-year period through 2006, the year-end average price to TBV ratio for the group was 3.6.

"A lot of investors respond by saying 'Well that of course makes perfect sense: Between the higher capital requirements, Durbin, Volker and all the other regulations, ROEs will be lower in the future than in the past'," Kowtoski wrote.  But the analyst disputed that notion by writing "Therefore I get a free option on the prospect that bank returns will trend towards normal over time."

1 of 2

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 17,778.15 +421.28 2.43%
S&P 500 2,061.23 +48.34 2.40%
NASDAQ 4,748.3960 +104.0840 2.24%

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