10 Financial Stocks With Double-Digit Gains in 2012

BOSTON (TheStreet) -- Are big financial companies' stocks, many with double-digit gains this year, doing a dead-cat bounce or are they early on the path to steady recovery due to investors' renewed confidence in the beleaguered sector?

Maybe both, because financial services was the worst-performing industry last year, losing 18.4%, and banks and insurers had nowhere else to go but up.

But also because investors' fears about the European sovereign debt crisis and its potential impact on the already struggling global economy have waned, and they're finding banks, in particular the globe-spanning ones, super cheap.

The multi-faceted financial-services sector is up 8.6% this year, second only to the materials industry's 11% gain, while the S&P 500 has a rise of 4.7%.

Eric Oja, a bank-industry analyst at S&P Capital IQ, said in an interview that he thinks the financials run this year "is a short-term rebound" coming off a bottom in October when investors feared an economic disaster as the European crisis was showing no progress. As a result, the sector's shares got pounded and the "worst-case scenario" got priced in.

"Since then, there seems to be more clarity about what's going on in Europe," which has proved reassuring to investors, he said.

In addition to that, fourth-quarter financial-industry results, although not great, were also a bit of a confidence builder for investors as most banks showed decent results and improvement in key capital ratios that indicate stability.

Oja said he expects financial sector stocks may remain range bound over the near term given their big bounce recently.

Indeed, Monday was a tough day for banks stocks, as the KBW Bank Index ( I:BKX) was down over 1%, with 21 out of 24 index components showing declines for the session. That pared this year's big gains.

Some of the largest share-price gainers this year were among the biggest losers last year.

The best example of that is Bank of America ( BAC). Its shares are up 31% this year after losing 58% in 2011.

Oja said that Bank of America was trading "at half of book value" late last year, "and that's a fire-sale price," so the company's fourth-quarter results may have many believing that the worst is behind it.

Perhaps also giving investors more confidence were last week's comments from the Federal Reserve, which indicated, in essence, that it will remain active in trying to help the economy by letting businesses and consumers know they can continue to borrow cheaply over the next few years.

The Fed said that it will probably keep interest rates low for the next three years and also provided an inflation target for the first time, and updated its economic projections.

Here, then, are 10 financial stocks that have among the biggest turnarounds in share prices this year:

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Bank of America ( BAC)

Company profile: Bank of America is one of the largest financial institutions in the world, with lending operations in the consumer, small business, and corporate arenas as well as asset management and investment banking divisions.

The company just reported net income of $85 million, or 1 cent per share, for 2011, roughly in line with analysts' expectations, and it also showed improvements in key capital ratios. But it continues to face legal issues stemming from its 2008 acquisition of the troubled mortgage maker Countrywide Financial.

Investor takeaway: Bank of America faces lots of challenges before it returns to solid fiscal health, but investors apparently think they can be met, as its shares are up 31% this year, after losing 58% last year. S&P has it rated "hold." In a survey of analysts' ratings, S&P found six "buys," five "buy/holds," 17 "holds," and one "weak/hold."


Barclays ( BCS)

Company profile: Barclays, based in the U.K., is one of the largest banks in the world, and in addition to its retail and business customer operations in Europe, Africa and Asia, runs a a debt-focused investment bank, and it owns Barclaycard, a large credit card issuer.

Investor takeaway: Down 32% last year, its shares are up 28% this year. S&P's survey of analysts found that two have it rated "buy," one has it rated "buy/hold," and two have it rated "hold."

Morningstar analysts are extremely cautious, noting that: "For now, Barclays sports a healthy core Tier 1 ratio of 11% as of Sept. 30. Proposed changes in U.K. and global regulations may leave Barclays short of capital, and we now see a 50% chance that the bank will need to raise capital to meet higher expectations."

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Goldman Sachs ( GS)

Company profile: Goldman Sachs is a global investment banking juggernaut. Its operations include investment banking, institutional client services, lending, and investment management. It has a $54 billion market value.

Investor takeaway: Goldman's shares are up 23% this year after losing 45% in 2011. S&P has its shares rated "hold," while its survey of other analysts ratings found seven "buys," five "buy/holds," 15 "holds," and one "weak/hold." Analysts expect it to earn $12.04 per share this year and that will grow by 6% in 2013.


Morgan Stanley ( MS)

Company profile: Morgan Stanley is a global investment bank with institutional securities, wealth management and asset management segments.

Investor takeaway: The company's shares are up 23% this year after losing 44% in 2011. S&P has a $21 price target on its shares, a 14% premium. S&P found 10 "buy" ratings, three "buy/holds," 13 "holds," and two "weak/holds," in a survey of analysts.

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Citigroup ( C)

Company profile: Citigroup, a poster child for the massive government banking industry bailout of three years ago, is a global financial-services company doing business in more than 160 countries. It serves commercial and consumer clients through its regional consumer banking segment and provides investment banking, treasury, and securities services through its institutional clients group.

For fiscal 2012, analysts estimate that the company will earn $4.08 per share and that will grow by 14% in 2013.

Investor takeaway: Citigroup's shares, down 44% in 2011, are up 17% this year. S&P has it rated "hold," with a $35 price target, which is about a 17% premium to the current price. It reported net income of $11.3 billion, or $3.69 per share, for 2011, below analysts' consensus views.

The bank's huge presence in developing countries gives it the opportunity to outdo U.S. banks in terms of loan growth. S&P's survey of analysts, found 10 "buys," six "buy/holds," seven "holds," two "weak/holds," and one "sell."


Prudential Financial ( PRU)

Company profile: Prudential is one of the nation's largest life insurers. It also sells asset-management products to individuals and institutions. It has a large international insurance division that operates in more than 30 countries, and is growing that fastest in Asia.

Investor takeaway: Down 12% last year, Prudential's shares have gained 14% this year. S&P downgraded its rating in November to "hold" from "strong buy," but its analyst said that "longer term, we view positively (Prudential's) mix of business and its superior financial flexibility." S&P's survey of analysts' ratings found nine "buys," seven "buy/holds," and four "holds."

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Credit Suisse ( CS)

Corporate profile: Credit Suisse, based in Switzerland, is a global banking and financial-services company. About half of its revenue comes from investment banking and a large part from wealth management. It also has an asset management unit.

Investor takeaway: Credit Suisse's shares have gained 14% this year after a 38% loss last year. S&P's survey of analysts found one "buy" rating, one "buy/hold," two "holds," and one "weak/hold." For fiscal year 2012, analysts estimate that the company's earnings will grow by 19% to $2.95 per share.


MetLife ( MET)

Company profile: MetLife is America's largest life insurer and also supplies ancillary financial-services products.

Investor takeaway: Down 28% last year, MetLife's shares are up 14% in 2012. Two weeks ago, S&P reiterated its "buy" rating and raised its 12-month target price on the shares by $7 to $42, a 17% premium. S&P's survey of analysts' rating found eight "buys," eight "buy/holds," and four "holds."

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Manulife ( MFC)

Company profile: Manulife is the largest Canadian life insurer by market value. It provides financial protection and wealth-management products and services to individual and group customers. It operates in the U.S. under the name John Hancock and also does a strong business in Asia.

Investor takeaway: Down 35% in 2011, Manulife's stock is up 12% this year. Analysts give its shares one "buy/hold" and two "hold," ratings, according to an S&P survey.


JPMorgan Chase ( JPM)

Company profile: JPMorgan Chase is one of the largest financial institutions in the U.S., with more than $2 trillion in assets and operations in more than 60 countries.

Investor takeaway: JPMorgan Chase fell 20% last year, and its shares are up 13% this year. S&P said the firm's fourth-quarter results "were adversely affected by trading revenues of only $750 million, down sharply from an average of $2.8 billion in the prior four quarters, due to risk aversion on the part of corporate customers."

But analysts' consensus is for earnings of $4.70 per share this year, with growth of 14% in 2013. A survey of analysts by S&P found 18 "buys," nine "buy/holds," and five "holds."

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>>To see these stocks in action, visit the 10 Financial Stocks With Double-Digit Gains in 2012 portfolio on Stockpickr.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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