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Bank of America Downgraded Following Stress Tests

Top Picks

Staite wrote that his "top picks" in the banking sector remain PNC Financial Services Group (PNC) of Pittsburgh and JPMorgan Chase (JPM - Get Report). He considers PNC another low-risk interest-rate play, and also cited the company's strong performance in the stress tests.

For JPMorgan Chase, Staite cited a low valuation, the company's strong franchise and the possibility of a turnaround in trading revenue.

PNC's shares closed at $86.87 Friday and traded for 11.6 times the consensus 2015 EPS estimate of $7.52. The consensus 2014 EPS estimate is $7.00. Staite on Monday raised his price target for the shares to $100 from $92.00.

JPM closed at $60.17 Friday and traded for 9.5 times the consensus 2015 EPS estimate of $6.35. The consensus 2014 EPS estimate is $4.90. Staite's price target for the shares was raised on Monday to $68 from $66.00.

Shares of Bank of America were down 1.3% in midday trading to $17.32, while U.S. Bancorp was up 0.6% to $43.27 and Wells Fargo was down 0.4% to $48.95.

PNC's shares were down 0.3% to $86.65 and JPMorgan was up 0.8% to $60.63.

Some Banks Dilute Shareholders, Despite Buybacks

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 TheStreet.com 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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