NEW YORK (
) -- The banking sector has had a wild ride this year, and now that third-quarter results are in for most of the nation's largest players,
has identified a select list of actively traded names with significant upside, based on consensus price targets.
Of course, a consensus price target could be based on a relatively small number of buy ratings among analysts, so we have limited our selections to names with at least half the analysts rating the shares a buy.
This approach excludes some well-known banking names, including
Bank of America
, which closed at $6.72 Monday, and had 46% upside based on the mean 12-month price target of $9.83, among analysts polled by FactSet. Out of 23 analysts covering Bank of America, only nine rate the shares a buy.
We also limited our selection to bank stocks with average daily trading volume of over 50,000 shares. Data was provided by SNL Financial.
KBW Bank Index
was down 25% year-to-date through Monday's close at 39.23. With hundreds of bank stocks trading below book value and profitable names trading at historically low levels to forward earnings estimates, bargains abound for patient investors confident about economic recovery.
FBR Capital Markets analyst Paul Miller said that the industry's third-quarter results have many banks "setting up well for year-end," and that "some of the dire scenarios discussed may have hit bank valuations harder than underlying fundamentals indicate." Miller added that "the banks were able to show decent loan growth in select asset classes, net interest income looks to be more resilient than expected, and credit has continued to improve," and that he was "incrementally more positive on bank stocks going into the end of the year."
Of course, even when we pare the list to only include bank stocks with at least half the analysts rating the shares a buy, we are including some risky names here. Read on for the details.
with up to 102% upside:
10. 1st United Bancorp
1st United Bancorp
of Boca Raton, Fla., closed at $5.24 Monday, down 24% year-to-date. Based on the mean 12-month price target of $6.94 among analysts polled by FactSet, the shares have 32% upside.
The company had $1.25 billion in total assets as of Sept. 30, with 15 branches in Southeast Florida and 7 branches in Central Florida.
The company announced on Monday that it would acquire Anderen Financial and its main subsidiary
, of Palm Harbor, Fla., for $37 million in stock and cash. Anderen has roughly $207 million in assets, with four offices in Central Florida.
The Anderen deal followed 1st United Bancorp's acquisition on Friday of the failed Old Harbor Bank of Clearwater, Fla., from the Federal Deposit Insurance Corporation. The failed bank had about $216 million in assets, with seven branches. The FDIC agreed to cover 80% of losses on $155.6 million of the failed bank's assets acquired by 1st United.
1st United purchased the failed Bank of Miami, NA, from the FDIC last December.
1st United reported third-quarter net income of $1.4 million, or five cents a share, increasing from $1.1 million, or three cents a share, in the second quarter, and a net loss of $232 thousand, or a penny a share, in the third quarter of 2010, when the company recorded a $2.87 million provision for loan losses. The provision declined to $1.45 for both the second and third quarters.
Third-quarter net interest income was $12.1 million, increasing from $9.2 million a year earlier, reflecting the Bank of Miami acquisition. The third-quarter net interest margin was a very strong 4.30%, increasing from 3.95% a year earlier.
The shares trade just below their tangible book value of $5.45 a share, according to SNL Financial, and 20 times the consensus 2012 earnings estimate of 25 cents a share.
Out of five analysts covering 1st United, three rate the shares a buy, while the other two analysts have neutral ratings.
9. First Commonwealth Financial Corp.
First Commonwealth Financial
of Indiana, Pa., closed at $4.71 Monday, declining 32% year-to-date. Based on the mean price target of $6.25 among analysts polled by FactSet, the shares have 33% upside.
Based on a quarterly payout of three cents, the shares have a dividend yield of 2.55%.
The company has about $5.7 in assets, operating 112
First Commonwealth Bank
branch offices in 15 counties in western and central Pennsylvania.
First Commonwealth is scheduled to report its third-quarter results on Friday, with the analysts expecting the company to earn eight cents a share, compared to EPS of seven cents in the second quarter and 11 cents in the third quarter of 2010.
Sterne Agee analyst Mike Shafir in early October included First Commonwealth among a list of smaller regional banks trading below tangible book value that had the "ample capital" and "stable credit quality" to support share buybacks. The company's ratio of Tier 1 capital to average assets was 11.1% as of June 30.
The shares trade for 0.8 times their June 30 tangible book value of $5.70, according to SNL Financial, and 11.6 times the 2012 consensus EPS estimate of 40 cents.
Out of nine analysts covering First Commonwealth, six rate the shares a buy and three analysts have neutral ratings.
8. JPMorgan Chase
closed at $34.57 Monday, 17% year-to-date. Based on the mean price target of $46.77 among analysts polled by FactSet, the shares have 35% upside.
With a 25-cent quarterly payout, the shares have a dividend yield of 2.89%.
full coverage of JPMorgan's
, including details on the company's
, and a
The shares trade just above their tangible book value of $32.53, according to SNL Financial, and 6.8 times the consensus 2012 EPS estimate of $4.93.
Out of 25 analysts covering JPMorgan Chase, 23 rate the shares a buy, while the remaining two analysts have neutral ratings.
closed at $31.60 Monday, down 33% year-to-date. Based on the mean price target of $42.84 among analysts polled by FactSet, the shares have 36% upside.
full coverage of Citigroup's
and the continued progress of CEO Vikram Pandit's
strategy to unwind noncore assets.
A third-quarter tangible book value estimate wasn't yet available from SNL, but Citi's shares trade for just over half their stated book value of $60.56. The shares trade for 6.9 times the consensus 2012 EPS estimate of $4.42.
Out of 22 analysts covering Citigroup, 16 rate the shares a buy, four have neutral ratings and two analysts recommend parting with the shares.
6. First Niagara Financial Group
First Niagara Financial Group
of Buffalo, N.Y., closed at $8.64 Monday, for a year-to-date decline of 36%. Based on the mean price target of $11.83 among analysts polled by FactSet, the shares have 37% upside.
With a quarterly payout of 16 cents, the shares have a 7.41% dividend yield.
First Niagara is looking to complete its deal to acquire 195 branches in Upstate New York and Connecticut from
early next year, after which the company will need to sell roughly 100 of the acquired branches to settle anticompetitive concern of the Justice Department. The company expects to raise between $750 million and $800 million in common equity before closing on the HSBC deal.
Following First Niagara's
, Guggenheim Securities analyst David Darst on Thursday pointed out that the company's shareholders faced increasing dilution from the capital raise, because the shares had dropped 26% since the HSBC deal was announced in July.
The analyst maintained his neutral rating on First Niagara's shares, while lowering his 12-month price target by a dollar to $9.50, saying that "based on management commentary of the integration process, we think FNFG moves forward with the deal; however, the final branch size and capital structure could change as has the expected accretion/return."
The shares trade for 1.2 times their tangible book value of $7.42, according to SNL Financial, and 7.9 times the consensus 2012 EPS estimate of $1.13.
Out of 12 analysts covering First Niagara, six rate the shares a buy, four have neutral ratings and two analyst recommend selling the shares.
5. Oriental Financial Group
Oriental Financial Group
of San Juan, Puerto Rico, closed at $10.80 Monday, declining 12% year-to-date. Based on the mean price target of $15.13 among analysts polled by FactSet, the shares have 40% upside.
With a quarterly payout of five cents, the shares have a dividend yield of 1.85%.
The company on Tuesday reported third-quarter net income available to common shareholders of $15.6 million, or 35 cents a share, declining from $25.3 million in the second quarter but improving from a loss of $31.7 million a year earlier, when the company booked $14.7 million in impairment charges on securities and took $22.6 million in losses on derivatives.
The earnings decline from the second quarter reflected "increased premium amortization in the third quarter of 2011 due to the decline in interest rates which caused an increase in pre-payments, versus a decrease in pre-payments and premium amortization in the second quarter of 2011," as well as lower investment securities balances.
Oriental's net interest margin -- the difference between a bank's average yield on loans and investments and its average cost for deposits and wholesale borrowings -- narrowed to a tax-adjusted 2.57% during the third-quarter, from 3.33% the previous quarter and 3.63% a year earlier.
The company said that its share count had been reduced by 5% over the previous year through share repurchases. The company said it had "bought approximately 894,000 shares, at an average price of $10.24 per share, just before the end of the third quarter and subsequent to the quarter-end."
The company's tangible common equity ratio increased to 9.32% as of Sept. 30, from 9.21% the previous quarter, despite the buybacks.
The shares trade for 0.7 times their tangible book value of $14.83, according to SNL Financial, and 6.4 times the consensus 2012 EPS estimate of $1.65.
All four analysts covering Oriental Financial Group rate the shares a buy.
4. Citizens Republic Bancorp
Citizens Republic Bancorp
( CRBC) of Flint, Mich., closed at $7.98 Monday, returning 30% year-to-date. Based on the mean price target of $12.67 among analysts polled by FactSet, the shares have additional upside of 59%.
The company owes $300 million in bailout funds received through the Troubled Assets Relief Program, or TARP, and has deferred its last seven quarterly dividend payments to the government.
The company is scheduled to report its third-quarter results on Friday, with analysts expecting earnings of 18 cents a share. During the second quarter, Citizens Republic reported net income applicable to common shareholders of $18.5 million, or 46 cents a share, which was its first quarterly profit in three years. The profit mainly resulted from a $17.8 million release of loan loss reserves and a $10 million income tax benefit.
Citizens Republic continues to operate under agreements with state regulators and the Federal Reserve, limiting its ability to return capital to investors and pay dividends. The company's Tier 1 common equity ratio was 6.36% as of June 30, which was by far the lowest among this group of 10 bank and thrift holding companies.
The shares trade for 0.9 times their tangible book value of $9.22, according to SNL Financial, and 6.5 times the consensus 2012 EPS estimate of $1.21.
Three of the four analysts covering Citizens Republic recommend buying the shares, while the remaining analyst has a neutral rating.
Because of its relatively low capital levels, remaining TARP obligation and regulatory agreements, Citizens Republic remains a highly speculative play, despite the analyst support. The fourth-quarter results on Friday could include some interesting announcements.
3. Park Sterling Corp.
Park Sterling Corp.
of Charlotte, N.C., closed at $3.95 Monday, declining 36% year-to-date. Based on the mean price target of $6.50 among analysts polled by FactSet, the shares have 65% upside.
Park Sterling was formed on October 6, 2010 to serve as the holding company for Park Sterling Bank, which was chartered in September 2008. The company is rapidly expanding, and -- as is typical for a "de novo" bank -- has not yet achieved consistent profits.The company had $610.7 million in total assets as of June 30, with four branches.
The company on July 13 announced it had received approval from the Federal Reserve and state regulators for its acquisition of
Community Capital Corp.
( CPBK) of Greenwood, S.C., which is expected to be completed this quarter. Park Sterling will pay about $32.4 million in cash and stock for Community Capital, bringing on roughly $637 million in assets and 18 branches spread across South Carolina. The deal is expected to be completed by mid-November.
The company's ratio of nonperforming assets to total assets was 5.34% as of June 30, improving from 5.85% the previous quarter. The annualized ratio of net charge-offs to average loans during the second quarter was 3.93%, and reserves covered 2.96% of total loans as of June 30.
As would be expected at this stage of its growth, Park Sterling was very strongly capitalized, with a tangible common equity ratio of 28.43% as of June 30, according to SNL Financial, making it well-positioned to double in size from the Community Capital transaction, fund continued expansion plans and continue working through its nonperforming loans.
The consensus estimate among analysts polled by FactSet is for Park Sterling to post a net loss of eight cents a share for the third quarter, and also a loss of 8 cents a share for all of 2012.
The shares trade for 0.6 times their tangible book value of $6.19, according to SNL Financial. The consensus among analysts polled by FactSet is for Park Sterling to lose eight cents a share in 2012.
All three analysts covering Park Sterling rate the shares a buy.
2. Metro Bancorp
of Harrisburg, Pa., closed at $8.46 Monday, down 23% year-to-date. Based on the mean price target of $14.17 among analysts polled by FactSet, the shares have 67% upside.
The company's main subsidiary Metro Bank is operating under an April 2010 consent order, agreeing with state regulators and the FDIC "to correct and prevent certain unsafe or unsound banking practices," and to analyze Bank Secrecy Act and Office of Foreign Assets Control staffing needs, as well as "qualifications and an analysis and assessment of the independence and performance of the Bank's directors and senior executive officers,"
The company reported a third-quarter net loss of $5.7 million, or 41 cents a share, compared to earnings of $2 million, or 14 cents in the second quarter, and a net loss of $6.2 million, or 46 cents, in the third quarter of 2010.
During the third quarter, Metro Bancorp recorded a $13.8 million provision for loan losses, after setting aside just $1.7 million for reserves the previous quarter. A year earlier, the provision totaled $13.4 million.
The company's annualized ratio of net charge-offs (loan losses less recoveries) to average loans during the third quarter was 3.34%, with loan losses rising "as a result of updated appraisals of collateral and financial information during the period associated with seven loan relationships," all of which were "originated in the years 2004 through 2008," according to CEO Gary Nalbandian.
While the company's nonperforming assets "trended lower for the fifth consecutive quarter to $45.5 million, or 1.87%, of total assets at September 30, 2011 from a high of $70.6 million, or 3.22%, or total assets at June 30, 2010," according to Nalbandian, a relatively low 1.61% ratio of loan loss reserves to total loans could point to additional quarterly losses if the bank is surprised again by declining collateral values.
The shares trade for just over half their tangible book value of $15.54, according to SNL Financial, and 14 times the consensus 2012 EP estimate of 66 cents.
All three analysts covering Metro Bancorp rate the shares a buy.
1. Popular, Inc.
of Hato Rey, Puerto Rico, closed at $1.81 Monday, sliding 42% year-to-date. Based on a mean price target of $3.65 among analysts polled by FactSet, the shares have 102% upside.
The company owes $935 million in TARP money.
Popular announced third-quarter earnings to common shareholders of $26.6 million, or 3 cents a share, compared to second-quarter earnings of $109.8 million, or 11 cents a share, and third-quarter 2010 earnings of $494.1 million, or 48 cents a share, when the company booked a $531 million gain on the sale of a 51% stake in its Evertec subsidiary.
Third quarter earnings declined sequentially because of a $32 million increase in provisions for loan losses and because the second-quarter results included "a tax benefit of approximately $59.6 million related to the timing of loan charge-offs for tax purposes."
Third-quarter provisions increased because the company on September 29 "completed the sale of construction and commercial real estate loans with an unpaid principal balance and net book value of approximately $358 million and $128 million, respectively," the majority of which were nonperforming loans.
While there haven't yet been any high profile downgrades for Popular's shares, FBR Capital Markets analyst Brett Scheiner told SNL Financial that "if someone is still struggling with credit improvement, they're not going to get much love from the Street right now." On the other hand, the analyst applauded Popular's plans to reduce its branch presence in Puerto Rico to eliminate between 200 and 250 full-time equivalent positions and save roughly $25 million in annual expenses, and said that the company had integrated its April 2010 acquisition of the failed Westernbank Puerto Rico "with no expense impact."
All five analysts covering Popular, Inc., rate the shares a buy.
>>To see these stocks in action, visit the
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Written by Philip van Doorn in Jupiter, Fla.
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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.