NEW YORK ( TheStreet)-- Banks stocks in the U.S. have had an impressive run of late.

Over the past three months SPDR KBW Bank ( KBE) and SPDR KBW Regional Banking ( KRE), exchange traded funds that track large-cap and mid-cap banks, have returned 12.78% and 11.8% respectively, versus 7.5% for the S&P 500.

For small and mid-sized banks, particularly ones that are just now returning to profitability, investors appear to be betting they will be snapped up in a wave of consolidation. Long-awaited M&A in the banking sector appears finally underway, with a spate of deals closing out 2010 getting investors excited about the potential for more transactions.

Some of these weaker banks may even surprise people by turning out to be acquirers. That's because the losses they piled up during the crisis can be used to shelter future profits. For example, if Regions Financial ( RF), which lost 67 cents per share in 2010, were to acquire a profitable company it could make use of still-undeclared loan losses to avoid paying taxes on the next $3.5 billion it earns, according to corporate tax consultant Bob Willens.

However, if Regions gets acquired, it will lose that benefit.

For the larger players, investors appear to be looking for increased dividend and share buybacks now that nearly all these institutions have built up big capital cushions in the wake of the crisis.

Not to mention the fact that the economy looks to be on the mend, and, to paraphrase Fairholme Capital Management CEO Bruce Berkowitz, who has been buying up shares of big beaten up U.S. financials by the truckload, it is hard to imagine a recovery that excluded institutions like Citigroup ( C), Morgan Stanley ( MS) or Bank of America ( BAC).

So, given the big run-up in bank stocks of late, it's a good time to take a look at some of the biggest bargains out there.

To arrive at our list, we looked at banks located in the U.S. with a market cap of at least $1 billion. We used Bloomberg analyst consensus estimates for one year out and picked the 10 banks with the lowest price-to-earnings multiple one year out based on those consensus estimates. The ranking is based on the close of trading Monday. Here are the results.

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10. MB Financial ( MBFI)

Price-to-earnings ratio one year out: 11.50

Chicago-based MB Financial reported fourth-quarter earnings of a penny per share.

Sandler O'Neill analyst Brad Milsaps rates MB a "hold," arguing in a report after the earnings release that asset quality is improving, which he sees as a clear plus for the stock price. However, he is concerned about the fact that non- performing assets are still well above 7% of MB's total loan book.

"Pressure on net interest income and fee revenues may limit material growth in pre-provision income near term, but it seems that credit leverage should be positive," Milsaps states in his latest report.

FBR Capital Markets analyst Paul Miller rates MB "market perform," but noted in a Jan. 31 report that management has become more constructive on the likelihood of an economic recovery in the Chicago area.

"It is now cautiously optimistic and believes that the current recovery is sustainable," Miller states in his report.

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9. U.S. Bancorp ( USB)

Price-to-earnings ratio one year out: 11.23

U.S. Bancorp reported fourth quarter earnings of 49 cents per share.

Expenses were slightly higher than Oppenheimer & Co. analyst Chris Kotowski had expected, though he stated in a Jan. 19 that he was not overly concerned by what he referred to as a "fourth quarter blip." Kotowski cited improving revenues that beat his expectations and improving asset quality.

Kotowski, who has an "outperform" rating on U.S. Bancorp, calls the stock "a high quality growth oriented way to participate in the recovery of the banking industry."

Keefe, Bruyette & Woods analyst David Konrad argues U.S. Bancorp will be a "first mover" among large cap banks in increasing its dividend and buying back shares. He also sees the bank as "in a position to consider any attractive M&A deals."

U.S. Bancorp acquired a small New Mexico-based bank last month, though the deal was so small it did not cause KBW's Konrad to adjust his earnings estimates.

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8. Huntington Bancshares ( HBAN)

Price-to-earnings ratio one year out: 11.19

Huntington reported fourth quarter earnings of five cents per share last month, including a one time TARP repayment that cost it seven cents per share of earnings. Credit improved, according to FBR Capital Market analyst Paul Miller, who noted that both non-performing loans and net charge-offs dropped during the quarter. Miller rates Huntington "outperform," with an $8 price target.

"We have been stressing the importance of loan growth in generating sustainable earnings and are encouraged by Huntington 's progress," Miller stated in a Jan. 21 report.

Less bullish is Sandler O'Neill analyst Scott Siefers, who has a "hold" and a $7 price target on Huntington.

"Credit improvement now seems almost a given considering how well the company has fared in the past few quarters. Consequently, further improvement, while both hoped-for and expected, may not be enough to drive the stock much higher on its own, except to the extent that it leads to faster tangible book value creation," Siefers wrote in a Jan. 20 note.

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7. Fifth Third Bancorp ( FITB)

Price-to-earnings one year out: 11.07

Cincinnati-based Fifth Third earned 33 cents per share in the fourth quarter, beating analyst estimates of 24 cents. Earlier this month, Fifth Third repaid the $3.4 billion in taxpayer funds it received during the crisis under the U.S. Treasury Department's Troubled Asset Relief Program.

Following the announcement, FBR Capital Markets analyst Paul Miller reiterated his "market perform" rating and $14 price target, arguing that while paying back TARP is a positive and won't likely dilute the bank's earnings, he does not expect it will add to earnings either. Also, he writes, "the company still has significant credit issues to work through."

Sandler O'Neill analyst Scott Siefers was more impressed with the TARP repayment and earnings beat than Miller. He kept his "hold" rating on Fifth Third, but upped his price target to $16 from $15 and wrote in a Jan. 20 report that he will "be watching this name closely for an opportunity to become more constructive."

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6. PNC Financial Services Group ( PNC)

Price-to-earnings one year out: 9.93

Pittsburgh-based PNC earned $1.50 per share in the fourth quarter, beating Wall Street estimates of $1.38.

"The results were decent, but some investors may harp on poor loan demand and the higher efficiency ratio from increased compensation costs and hedging costs related to residential mortgage servicing rights," argued FBR's Paul Miller in a Jan. 21 research note.

A more bullish sign, according to Miller, was that the bank's net interest margin fell by just three basis points as PNC did better than had been expected at recovering cash from the portfolio of National City, which PNC acquired in 2008.

Miller rates PNC "outperform" with an $80 price target. He described the quarter as "ho hum," but he is bullish on PNC because he argues the market undervalues the earnings boost PNC gets from the Nat City acquisition through the use of purchase accounting. He stated in his report that accretion related to the purchase of the distressed Nat City loans has added 31% to operating earnings per share over the past four quarters and should add another $2.72 per share to PNC's earnings over the life of the portfolio.

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5. Sterling Financial Corp. ( STSA)

Price-to-earnings one year out: 9.57

Sterling Financial posted an operating loss of 56 cents per share, better than consensus estimates of a 68 cent loss. Credit showed improvement, with net charge offs falling 59% and non-performing assets falling by 14%, according to FBR's Miller. Non-performing loans dropped by 19.1 percent versus the fourth quarter of 2009, which according to Miller reflects the run-off of construction loans. Such loans had been one of the big problem areas for Sterling, Miller writes.

Miller has a "market perform" rating on Sterling and a $19 price target.

"Given the aggressive marks and outsized losses already taken on the loan portfolio coupled with this quarter's improvement, we believe that future losses should moderate," Miller wrote in a Jan. 27 note following Sterling's fourth quarter earnings report.

Miller expects Sterling will become profitable starting next quarter, while posting positive earnings in 2011 and 2012, which should help it recover a deferred tax asset that has been sitting on its books.

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4. Citigroup ( C)

Price-to-earnings one year out: 9.22

Citigroup earned four cents per share in the fourth quarter, missing analyst projections primarily due to weak trading results

Credit Agricole Securities analyst Mike Mayo argued in a Jan. 18 note consensus 2001 estimates were too high for Citigroup at 46 cents, versus his 40 cent estimate. (The consensus has since come down to 43 cents, according to Thomson Reuters.)

Mayo and tax expert Bob Willens have accused Citigroup of "aggressive accounting," relying on what they say are rosy earnings projections in order to preserve a deferred tax asset. If Citigroup's projections were more realistic, in their view, Citigroup would have to take what is known as a "valuation allowance," which would reduce its book value.

Citigroup's post-earnings earnings conference call "highlighted improving credit trends and expectations that non-US operations should continue to remain the key driver for the company," Mayo wrote. However, his concerns included "an expected margin decline in the first quarter... an increase in core expenses...a slower pace of disposition of Citi Holdings, and higher credit costs in international consumer given the rate of expansion of loans."

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3. Wells Fargo ( WFC)

Price-to-earnings one year out: 9.16

Wells Fargo earned 61 cents per share in the fourth quarter, in line with Wall Street estimates.

Following the surprise resignation of CFO Howard Atkins on Tuesday, Morgan Stanley analyst Betsy Graseck reiterated her "overweight" rating.

"We expect credit improvement, improving top-line growth, and further accretion from the Wachovia acquisition to drive higher long-term earnings growth in the out years."

Graseck expects San Francisco-based Wells to be among the first banks to raise dividends and buy back shares.

Ken Thomas, an economist and independent bank consultant, argues the Wachovia acquisition was the best deal of the crisis.

Oppenheimer & Co. analyst Chris Kotowski was encouraged by loan growth at Wells, according to a report he published after the bank released fourth quarter earnings. He also wrote that "credit quality trends were substantially better than expected," with non-performing assets down 7% and net charge-offs dropping by 13%.

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2. JPMorgan Chase ( JPM)

Price-to-earnings one year out: 8.15

JPMorgan earned $1.12 in the fourth quarter, beating analyst expectations of 99 cents. Trading was a standout in a weak quarter for the industry. JPMorgan's trading success even earned a "congratulations" from Goldman Sachs CFO David Viniar when Goldman discussed its own weak trading performance with analysts after its earnings release.

Non-performing loans continued to drop, as did delinquency rates in home loans and credit cards, according to Sandler analyst Jeff Harte.

In a Jan. 17 note, Oppenheimer's Kotowski pronounced himself "very pleased," with JPMorgan's fourth quarter earnings report, noting the stock "remains one of our top picks."

JPMorgan attracted some negative headlines recently following a lawsuit by Bernard Madoff trustee Irving Picard seeking more than $5 billion, but the affect on the stock appeared minimal, and to last for a day at most.

JPMorgan is expected to raise its dividend shortly, perhaps as soon as two weeks from now, according to a report from RBC Capital Markets.

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1. Bank of America ( BAC)

Price-to-earnings one year out: 7.79

Bank of America lost 16 cents per share in a fourth quarter that was difficult for analysts to decipher given various "one time expenses" related to the bank's mortgage-related difficulties. Trading was weak, as was the case for most big banks in the quarter.

Raymond James analyst Anthony Polini reiterated his "strong buy" rating after the earnings report. He has a $24 target price. Polini sees credit quality as having improved at Bank of America, and he believes the bank is "well-positioned to increase the dividend" in the second half of this year.

Bank of America shares rallied at the start of the year after the bank settled legal disputes over mortgage backed securities (MBS) with Fannie Mae and Freddie Mac. Disputes over so-called "private label" MBS are ongoing. Bank of America executives said during the fourth quarter earnings call that costs won't exceed $7-10 billion, though at least one of the MBS investors facing off against the bank told the Financial Times he believes MBS investors may be able to extract far more than that if they are well-coordinated in their fight. The disputes are expected to drag on for years.

>To see these stocks in action, visit the 10 Cheapest Big U.S. Bank Stocks portfolio on Stockpickr.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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