State Street: Financial Winner (Update 1)

Updated to include a discussion on KeyCorp and market close information.

NEW YORK ( TheStreet) -- State Street ( STT) was the winner among the largest U.S. financial names on Thursday, with shares rising over 3% to close at $40.85.

The broad indexes rose after the U.S. Labor Department announced that first-time jobless claims for the week ended Feb. 18 were unchanged from the previous week, at 351,000. The report also said that the number of people receiving unemployment benefits declined by 52,000 to 3.39 million, in the week ended Feb. 11.

The The KBW Bank Index ( I:BKX) rose over 1% to close at 45.08, with 23 out of the 24 index components showing afternoon gains.

State Street's shares have now risen 1% year-to-date, following an 11% decline in 2011. Based on a quarterly payout of 18 cents, the shares have a dividend yield of 1.82%.

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State Street's shares trade for 1.8 times tangible book value, according to HighlineFI, and for 10 times the consensus 2012 earnings estimate of $3.87 a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is $4.49.

Out of 23 analysts covering State Street, 15 rate the shares a buy, while seven have neutral ratings and one analyst rates the shares "Underperform."

Gerard Cassidy is among the believers, rating State Street "Outperform," with a price target of $52, and saying on Feb. 10 after the company's Analyst Day in New York that "investors should buy a market leading custodial bank, with STT being at the top of the list," and that with its very strong capital base, we expect the company to buy back more stock and raise the dividend in 2012.

Following the completion of the Federal Reserve's stress tests in March, Cassidy anticipates approval for State Street "to increase the dividend to 20-25% of earnings or up to $0.88 versus the $0.72 per share annual dividend paid today," and that the company will "buy back approximately 20 million shares in 2012."

The analyst said "the company remains on the right track despite the challenging macro environment," and that "while securities finance and foreign exchange businesses are likely to remain under duress into 2012... servicing and asset management fees should continue to exhibit growth."

Cassidy estimates that State Street will earn $3.90 a share in 2012, followed by EPS of $4.50 in 2013.

Interested in more on State Street? See TheStreet Ratings' report card for this stock.

Shares of Capital One Financial ( COF) rose over 2% to close t $49.30.

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The shares have returned 14% year-to-date, after a flat performance during 2011.

Capital One now trades for eight times the consensus 2012 earnings estimate of $5.76 a share. The consensus 2013 EPS estimate is $6.78.

The company completed its acquisition of ING Direct last Friday, and now has the liquidity needed to support its next major acquisition, of HSBC's ( HBC) U.S. credit card portfolio, which is expected to be completed during the second quarter, contingent on approval from the Office of the Comptroller of the Currency. Capital One is expected raise up to $1.25 billion in common equity, to support the HSBC deal.

KBW analyst Melissa Roberts on Thursday said that with the impact on Capital One's share count from the ING deal, index funds tracking the S&P 500 Index will need to purchase about 12.3 million Capital One shares.

KBW rates Capital One "Outperform," with a $48.25 price target, estimating the company will earn $5.64 a share in 2012, followed by EPS of $5.53 in 2013.

Interested in more Capital One? See TheStreet Ratings' report card for this stock.

Shares of KeyCorp ( KEY) of Cleveland also rose over 2% on Thursday, to close at $8.06.

The shares have now risen 5% year-to-date, following last year's 12% decline.

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KeyCorp trades for 0.9 times tangible book value and 19 times the consensus 2012 earnings estimate of 76 cents a share. The consensus EPS estimate for 2013 is 81 cents.

The company was included in Jefferies analyst Ken Usdin's report on Wednesday, highlighting regional banks with notable growth in commercial and industrial loans. KeyCorp's C&I loans grew 7% during the fourth quarter, to $19.4 billion, as of Dec. 30.

Usdin said that the company's "loan growth continues to build, as strength in C&I has outpaced run-off from exit portfolios," and that although the company's wind-down of certain loan types "will likely a put a cap on overall growth potential," the company "has beaten most expectations for total loan growth to return to positive territory."

The analyst has a "Hold" rating on KeyCorp, with an $8 price target, and estimates the company will earn 70 cents a share in 2012, followed by EPS of 75 cents in 2013.

Interested in more KeyCorp? See TheStreet Ratings' report card for this stock.

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-- Written by Philip van Doorn in Jupiter, Fla.

To contact the writer, click here: Philip van Doorn.

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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.