Wells Fargo: Financial Winner

NEW YORK ( TheStreet) -- Wells Fargo ( WFC) was the winner among the largest U.S. financial names on Monday, with shares rising 3% to close at $31.07.

The National Association of Realtors (NAR) reported that its Pending Home Sales Index had risen 2% to 97.0 in January, from a revised 95.1 in December, and 89.8 in January 2011. The pending sales report followed last Wednesday's report that existing-home sales in January had risen 4.3% to a seasonally adjusted rate of 4.57 million, from a revised 4.28 million in December and 4.54 million in January 2011.

Lawrence Yun, the NAR's chief economist, said on Monday that "given more favorable housing market conditions, the trend in contract activity implies we are on track for a more meaningful sales gain this year," and that "with a sustained downtrend in unsold inventory, this would bring about a broad price stabilization or even modest national price growth, of course with local variations."

The The KBW Bank Index ( I:BKX) rose over 1% to close at 45.30.

Wells Fargo's shares have now returned 13% year-to-date following a 10% decline in 2011.

Based on a quarterly payout of 12 cents, the shares have a dividend yield of 1.54%, and shareholders are looking for a boost in Wells Fargo's return of capital following the end of the Federal Reserve's current round of bank stress tests on March 15.

Sterne Agee analyst Todd Hagerman said on Feb. 17 that Wells Fargo "continues to generate excess capital, which should give the company a meaningful buffer against macroeconomic headwinds, as well as position the company well," heading into the stress tests. The analyst expects "an increase in the dividend payout ratio to about 20-25% (vs. the 16-18% in 2011)," as well $60 million in buybacks this year, which is "significantly lower than the company's 2011 200mm share authorization."

Hagerman estimates that Wells Fargo will earn $3.20 a share in 2012, followed by EPS of $3.50 in 2012.

Wells Fargo's shares trade for 1.6 times tangible book value, according to HighlineFI, which is by far the highest price-to-book ratio among the "big four" U.S. banks, reflecting the company's steady and strong earnings performance, with its return on average assets (ROA) ranging from 1.21% to 1.27% over the past four quarters.

The shares trade for 10 times the consensus 2012 EPS estimate of $3.20. The 2012 consensus EPS estimate is $3.69.

Here's how Wells Fargo's performance and price multiples stack up with the rest of the big four:
  • Shares of JPMorgan Chase (JPM) closed at $39.14 Monday, returning 19% year-to-date, following a 17% decline in 2011. The company's ROA has ranged between 0.66% and 1.06% over the past five quarters. Based on a quarterly payout of 25 cents, the shares have a dividend yield of 2.55%. JPMorgan's shares trade for 1.2 times tangible book value, and eight times the consensus 2012 EPS estimate of $4.66. The 2013 EPS estimate is $5.44.
  • Bank of America (BAC) has seen its shares rise 44% year-to-date, through Monday's close at $8.03, following last year's 58% decline. Over the past five quarters, the company's ROA has ranged from a negative 1.51% in the second quarter of last year, to 1.08%. The shares trade for just 0.6 times tangible book value, and for 11 times the consensus 2012 EPS estimate of 71 cents. The consensus 2013 EPS estimate for Bank of America is $1.20.
  • Shares of Citigroup (C) closed at $32.96 Monday, returning 25% year-to-date, following a 44% decline in 2011. Citi's ROA has ranged between 0.35% and 0.83% over the past year. The shares trade for a low 0.7 times tangible book value -- similar to Bank of America -- but Citi trades at a much lower multiple of eight times the consensus 2012 EPS estimate of $3.97. The consensus earnings estimate for Citigroup in 2013 is $4.76 a share.

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

Monday's bank stock loser was BankAtlantic Bancorp ( BBX) of Fort Lauderdale, Fla., with shares sliding over 15% to close at $2.80, after the company's deal to sell its main thrift subsidiary for a premium of $301 million to BB&T ( BBT) was permanently enjoined, after Delaware Court of Chancery Judge J. Travis Laster determined the sale of the thrift would violate the term of BankAtlantic's trust preferred securities.

Trust preferred shareholders sued to quash the deal, which would have brought them current on dividend payments in arrears, but would not have included the repayment of principal.

BB&T's investors shrugged, sending the stock up 1% to close at $29.79.

RELATED STORIES:






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

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

To follow the writer on Twitter, go to http://twitter.com/PhilipvanDoorn.
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.

If you liked this article you might like

It's Dumb to Think Amazon Will Be Able to Skirt Regulators Forever

It's Dumb to Think Amazon Will Be Able to Skirt Regulators Forever

Citigroup Gives CEO Corbat 48% Pay Raise as Profitability Misses Goal

Citigroup Gives CEO Corbat 48% Pay Raise as Profitability Misses Goal

Worst-In-Class Goldman Sachs CEO Blankfein Gets 9% Pay Raise

Worst-In-Class Goldman Sachs CEO Blankfein Gets 9% Pay Raise

Why Bank of America and Goldman Sachs Shares Are Perfect Inflation Hedges

Why Bank of America and Goldman Sachs Shares Are Perfect Inflation Hedges

Stock Market Volatility Leads to Frightened Investors: Bank of America Survey

Stock Market Volatility Leads to Frightened Investors: Bank of America Survey