Bank of America: Financial Winner

NEW YORK ( TheStreet) -- Bank of America ( BAC) was the winner among the largest U.S. financial names on Friday, with shares rising over 3% to close at $7.90.

The broad indexes all saw solid gains, amid continued expectations for coordinated action by G-20 central banks next week, if needed, following this week's Greek elections, amid continued uncertainty if the country will be able to form a government supporting previously agreed upon austerity measures, required for a second eurozone bailout.

Credit Suisse global equity strategist Andrew Garthwaite said early on Monday that if the anti-austerity Syriza party wins Greece's elections, "the probability of Greek exit from the euro would rise to around 50%," and that "if a Syriza-led government sticks to a hard-line stance, we believe equity markets would fall by around 10%." On the other hand, if "a Syriza-led coalition compromises or if there is a unity government, we think markets fall by approximately 5% - but then rally."

Garthwaite added that if Greece's New Democracy party "forms a coalition, we expect a roughly 3-5% rally in markets, which then fades."

Back home, the Federal Reserve reported that industrial production during May declined 0.1%, after increasing a revised 0.1% during April. The central bank said that "A decrease of 0.4 percent for manufacturing production in May partially reversed a large increase in April," and that "outside of manufacturing, the output of mines advanced 0.9 percent in May, while the output of utilities rose 0.8 percent."

Total U.S industrial production during May was 4.7% higher than a year earlier.

The KBW Bank Index ( I:BKX) rose 1.5% to close at 44.72, with all 24 index components ending the week with gains.

Bank of America's shares have now returned 42% year-to-date, after dropping 58% during 2011.

The shares trade for 0.6 times their reported March 31 tangible book value of $12.87, and for less than eight times the consensus 2013 earnings estimate of $1.01 a share, among analysts polled by Thomson Reuters. The consensus 2012 EPS estimate is 59 cents.

Credit Suisse analyst Andrew Marquardt on June 3 upgraded Bank of America to an "Overweight" rating, with a $10 price target, after the shares closed at $7.02 on June 1.

Marquardt said the sell-off in the shares was "sell off is overdone based on limited int'l exposure, housing in recovery mode, and meaningful expense leverage," and that "capital deployment is less of a differentiator among the largest banks now," following JPMorgan Chase's ( JPM) suspension of its share buyback program, and because Citigroup's plan to increase its capital return to investors this year was torpedoed by the Federal Reserve.

The analyst added that " and while top line remains challenging for the industry, we believe the degree of expense leverage for BAC will help support earnings improvement."

Marquardt estimates Bank of America will earn 85 cents a share this year, followed by earnings of a dollar a share in 2013.

Interested in more on Bank of America? See TheStreet Ratings' report card for this stock.


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

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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 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.