NEW YORK ( TheStreet) -- The Federal Deposit Insurance Corp. and the Federal Reserve issued a joint press release on Friday announcing the procedure for receiving and evaluating initial resolution plans, known as "living wills." Financial institutions with $250 billion or more in assets must submit the plans on Monday. These are the largest banks operating in the U.S. and includes those considered "too big to fail."
The living wills are supposed to outline how these banks can be unwound in an orderly fashion in a crisis. They're intended to prevent the kind of market chaos that followed the failures of Bear Stearns and Lehman Brothers. The FDIC and Federal Reserve will review each living will to determine whether the plan is credible and facilitates an orderly bankruptcy. The program, which is mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, will eventually cover all bank holding companies with assets of $50 billion or more and includes nonbank financial companies that are under the supervision of the Federal Reserve and FDIC. Updated living wills are required annually. Each living will has two sections. One will be released to the public, and the other will be kept confidential. The public section contains a description of the company's core businesses and information about assets, liabilities, capital, and major funding sources. The public portions of the living wells that are submitted Monday will be released by the end of Tuesday. Following is a table of information from the second-quarter 2012 FDIC Quarterly Banking Profile for the Big Institutions.
JPMorgan Chase ( JPM) ($35.73) is the largest FDIC-insured "too-big-to-fail" financial institution, with $1.976 trillion in assets. The bank is rated a hold according to ValuEngine and is 21.1% undervalued, but it has limited upside over the next 12 months even though it has a price-to-earnings ratio of 8.4. How will JP Morgan explain its "London Whale" derivatives loss of $2 billion, which is projected to rise to $9 billion? My semiannual value level is $29.81 with semiannual and annual risky levels at $39.47 and $41.66, respectively.
Bank of America ( BAC) ($8.18) is second in assets with $1.654 trillion, according to the FDIC. The stock may be 39.0% undervalued, but this hold-rated stock is projected to be flat to slightly lower over the next 12 months. BAC has the highest P/E ratio in the table at 14.6 times. My weekly value level is $7.48 with a monthly pivot at $8.17 and annual risky level at $15.72. Citigroup ( C) ($27.41) is third in assets with $1.314 trillion, according to the FDIC. The stock may be 75% undervalued, but the one-year projection is for a slight 1.8% gain. The P/E ratio is the lowest on these big seven banks at 7.3 times. My weekly value level is $23.09 with a monthly pivot at $28.13 and annual risky level at $30.25. Wells Fargo ( WFC) ($33.44) is the fourth "too-big-to-fail" bank with $1.238 trillion in assets. The stock is rated a buy according to ValuEngine with a projected gain of 7.4% over the next 12 months with a P/E ratio of 11.2. It appears that Wells Fargo will be stuck with a $30-per-share handle given a weekly value level at $31.38, annual, semiannual and quarterly pivots at $32.70, $33.99 and $34.08, respectively, and monthly and annual risky levels at $36.40 and $38.69, respectively. There is downside risk outside these levels as my semiannual value level lags at $25.39. US Bancorp ( USB) ($32.16) is rated a Buy according to ValuEngine, with a projected one-year gain of 9.3% with a P/E of 12.3 times. My weekly value level is $30.71 with quarterly and monthly pivots at $32.57 and $34.38, respectively. My annual risky level is at $36.66. Below these levels there's risk to my annual value level at $27.49. Capital One Financial ( COF) ($54.66) is rated a Buy according to ValuEngine, with a projected one-year gain of 5.8% and a P/E of 9.3. My weekly value level is $50.30 with monthly and quarterly pivots at $55.50 and $55.86, respectively. Below is my annual value level at $48.05. PNC Financial ( PNC) ($61.11) is rated a Buy, according to ValuEngine, with a projected one-year gain of 5.4% with a P/E of 9.9. My weekly value level is $56.23 with a quarterly pivot at $60.79 and annual risky level at $64.56. My semiannual value level is $53.42. I advocate the use of good-'til-canceled limit orders to add to long positions or become less short on share price weakness to the Value Levels. Traders should enter GTC limit orders to reduce the long positions or to add to a short position on strength to Risky Levels. Click here to review my "Buy and Trade" methodology. At the time of publication, Suttmeier had not positions in stocks mentioned. This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.