10 Banks Growing Tangible Book Value

NEW YORK ( TheStreet) -- With most of the larger banks having reported fourth quarter results, investment research firm Stifel Nicolaus has come up with a list of banks that have grown their book value per share.

The report, created by analysts Christopher Mustascio, Brian Zabora and Charles Nabhan, highlights that interest rate risk caused the difference between those banks with the largest tangible book value per share growth and those with the lowest tangible book value per share growth.

"Over the course of the credit cycle a lot of banks were posting negative earnings. That being the case, it brought up the question of how to value companies. We prefer tangible book because it takes out the intangible assets that vary from company to company," explained Nabhan in an interview with TheStreet. "But now that these banks have earnings the value is shifting back to P/E."

Investors should look at tangible book value per share when considering company valuations, especially with regional banks that are recovering from the recession, Nabhan adds.

The difference between tangible book value per share and book value -- which is considered fair value -- is that you take out goodwill and intangible assets such as patents or partnerships from the earnings equation.

"For those investors that look at price-to-book multiples over price-to-earnings multiples as their primary valuation measure for banks, this could narrow the gap between what looks expensive and what looks cheap if long term interest rates continue to rise," analysts said in the report.

In an interview with TheStreet, Brian Foran, managing director of equity research at Nomura Securities, affirmed that there was a large difference in the growth of banks' book values per share due to interest rates.

"From a couple standpoints, banks with large security portfolios fared worse this quarter simply because the interest rate environment has been so low for so long that the negative reinvestment has been a real problem," Foran said.

Here are the top ten large cap banks who are growing book value per share, according to Stifel Nicolaus.

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Wells Fargo

Wells Fargo ( WFC) posted one of the highest sequential-quarter increases in the sector, reporting an increase of four percent in its tangible book value per share -- or growing from $15.43 in the third quarter of 2010 to $16.04 in the fourth quarter.

That can be compared to Wells Fargo's book value per share increase of two percent from $22.04 in the third quarter to $22.49 in the fourth quarter.

In the fourth quarter, Wells earned $3.4 billion, or 61 cents per share, up 21% from the year-ago quarter. Revenue came in at $21.5 billion, down from the year-ago period but up from the third quarter. Earnings were in line with what Wall Street had expected, with revenue slightly higher than the average analyst estimate of $21 billion, according to Thomson-Reuters.

"Wells Fargo had a pretty solid quarter as expected. Repurchase reserve declined and demands declined as well. Non-accrual loans decreased for the first time since the Wachovia acquisition and we saw positive overall loan growth," said Nabhan.

Wells Fargo shares are currently trading at $32.70 with a market cap of $172.08 billion.

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U.S. Bancorp

U.S. Bancorp ( USB) had almost a three percent increase in tangible book value per share between the third and fourth quarters.

The bank reported a third quarter tangible book value per share of $8.98 in the fourth quarter of 2010, compared to $8.74 per share in the third quarter. Book value per share increased from $14.19 in the third quarter to $14.36 in the fourth quarter.

U.S. Bancorp topped analysts' estimates for the fourth quarter of 2010. The bank reported net income of $974 million, or 49 cents per share, and total net revenue of $4.7 billion. Analysts' consensus was that the bank would report a profit of 46 cents a share on $4.52 billion in revenue. The bank also reported a provision for credit losses lower than net charge-offs by $25 million and net securities losses of $14 million, which increased earnings per common share by three cents in the fourth quarter.

"USB doesn't have that many rundown portfolios and they are really clicking on all cylinders in terms of loan growth and they posted the strongest loan growth in our universe," Nabhan said. "USB is posting substantial earnings without releasing reserves unlike many other banks."

U.S. Bancorp shares are trading at $26.76 and the bank has a market cap of $51.41 billion.

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Fifth Third Bancorp

Fifth Third Bancorp's ( FITB) tangible book value per share increased just over two percent from the third to fourth quarters.

The tangible book value per share in the fourth quarter of 2010 was $9.94, compared to $9.74 in the third quarter of 2010. The bank's book value per share increased from $12.86 in the third quarter of 2010 to $13.06 in the fourth quarter of 2010.

Fifth Third beat analysts fourth quarter expectations, reporting a net income of $270 million, or 33 cents per share. Analysts polled by Thomson Reuters expected earnings of 24 cents per share. Fifth Third's net income was up 40% from the third quarter of 2010.

Fifth Third also announced it is raising $1.7 billion of common stock through a public offering to repay the Troubled Asset Relief Program.

Fifth Third shares are trading at $14.43 and the bank has a market cap of $11.49 billion.

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BB&T Corporation

BB&T Corporation ( BBT) had the fourth highest tangible book value per share growth, with an increase of 1.2 percent from last quarter.

BB&T reported that its tangible book value per share increased from $15.25 in the third quarter of 2010 which increased to $15.43 in the fourth quarter. Meanwhile, the bank's book value fell from $24.11 in the third quarter of 2010 to $23.67 in the fourth quarter of 2010.

BB&T reported a fourth quarter net income of $208 million, or 30 cents per diluted common share, in the fourth quarter of 2010, compared with $185 million, or 27 cents per diluted common share, during the fourth quarter of 2009. Analysts on average predicted a profit of 26 cents per share for the quarter, according to Reuters. Revenue was $2.33 billion, above analyst estimates of $2.2 billion.

BB&T shares are trading at $27.90 and the bank has a market cap of $19.37.

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PNC Financial Services PNC Financial Services ( PNC)'s tangible book value per share increased one percent increase over last year.

PNC reported that its tangible book value per share increased from $40.36 in the third quarter to $40.77 in the fourth quarter of 2010. The bank's book value per share increased from $55.91 in the third quarter of 2010 to $56.29 in the fourth quarter of 2010.

PNC Financial reported fourth-quarter net income of $798 million, or $1.50 a share, beating the consensus estimate of $1.38 cents a share among analysts polled by Thomson Reuters. The fourth-quarter results compared to net income of $1.1 billion, or $2.07 cents a share, in the third quarter and $1 billion, or $2.17 a share, in the fourth quarter of 2009.

PNC's shares are trading at $60.88 and the bank has a market cap of $32.02 billion.

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Bank of America

Bank of America Corp. ( BAC) reported that its tangible book value per share in the third quarter of 2010 grew a half a percentage point over last quarter.

The bank reported that its tangible book value per share grew from $40.36 in the third quarter to $40.77 in the fourth quarter. The bank's book value decreased from $21.17 in the third quarter of 2010 to $20.99 in the fourth quarter of 2010.

Bank of America disappointed analysts after it reported a fourth-quarter net loss of $1.2 billion, or 16 cents a share, compared with a year-earlier loss of $194 million, or 60 cents a share. Analysts had been expecting a $3 billion charge due to a settlement with government sponsored entities (GSEs) Fannie Mae and Freddie Mac over mortgage "putbacks," and a $2 billion "goodwill impairment charge" related to Bank of America's mortgage business, both of which were previously announced by the bank

Bank of America shares are trading at $13.63 and the bank has a market cap of $137.46 billion.

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KeyCorp

KeyCorp. ( KEY) reported that its tangible book value per share decreased slightly in the fourth quarter. The tangible book value per share dropped from $8.46 in the third quarter of 2010 to $8.45 in the fourth quarter of 2010.

In addition the bank also reported that its book value alson fell. KeyCorp's book value fell from $9.54 in the third quarter to $9.52 in the fourth quarter of 2010.

KeyCorp reported fourth-quarter net income available to common shareholders of $279 million, or 32 cents a share, which beat the estimate of 13 cents a share, among analysts polled by Thomson Reuters.

"The lack of tangible book value per share growth despite positive earnings at KEY is attributable to a rather significant reversal in unrealized gains on investment securities to unrealized losses during the quarter than run through the accumulated other comprehensive line item (i.e. capital) due to higher interest rates," said Stifel Nicolaus analysts in a report.

"One of the biggest surprises was seeing that KeyCorp reported a negative provision expense. We didn't expect them to post a provision expense of negative $97 million. We expected a positive $93 million," said Nabhan. "When you post a negative provision expense it actually adds to income. That was one of the biggest surprises of the quarter."

KeyCorp shares are trading at $8.94 and the bank has a market cap of $7.87 billion.

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Comerica

Comerica's ( CMA) tangible book value per share decreased 1.2 percent from the third to fourth quarter.

The bank reported that the tangible book value shrunk from $32.34 in the third quarter to $31.96 in the fourth.

Comerica's book value also decreased by 1.1 percent, from $33.19 in the third quarter of 2010 to $32.82 in the fourth quarter of 2010.

Fourth quarter results for the bank beat analyst estimates. Comerica reported net income to common shareholders of $95 million, or 53 cents a share, improving from $59 million, or 33 cents a share, the previous quarter and a loss of $62 million, 42 cents a share, in the fourth quarter of 2009. The consensus estimate of fourth quarter earnings was 32 cents a share, according to analysts polled by Thomson Reuters.

Comerica shares are trading at $39.10 and the bank has a market cap of $6.89 billion.

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SunTrust Banks

SunTrust Banks ( STI) tangible book value per share slid by 2.7 percent in the fourth quarter, declining by $24.42 in the third quarter of 2010 to $23.76 in the fourth quarter.

The book value per share fell 1.8 percent from $37.01 in the third quarter of 2010 to $36.34 in the fourth quarter of 2010.

SunTrust reported net income of $114 million, or 23 cents a share, compared to a net loss of $248 million, or 64 cents per share in the fourth quarter of 2009. Analysts polled by Thomson/Reuters had predicted the bank would earn seven cents a share in the fourth quarter of 2010.

SunTrust shares were trading at $29.13. The bank has a market cap of 14.58 billion.

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Regions Financial

Lastly, Regions Financial Corporation ( RF) reported a tangible book value per share decline of 5.1 percent. The bank reported that tangible book value per share fell from $6.42 in the third quarter of 2010 to $6.09 in the fourth quarter of 2010.

In addition the bank also reported that the book value declined 3.3 percent from $10.98 per share in the third quarter of 2010 to $10.62 in the fourth quarter of 2010.

Regions turned a profit, beating estimates for the fourth quarter. The bank reported fourth-quarter net income available to common shareholders of $36 million, or 3 cents a share, which exceeded the estimate of a 13-cent loss per share, among analysts polled by Thomson Reuters.

Region shares were trading at $6.89 and the bank has a market cap of $8.62.

>To see these stocks in action, visit the 10 Banks Growing Tangible Book Value portfolio on Stockpickr.--Written by Maria Woehr in New York. To contact the writer of this article, click here: Maria Woehr. To follow the writer on Twitter, go to http://twitter.com/newsgirlmw. To submit a news tip, send an email to: tips@thestreet.com.