Bank of America: Economic Growth Winner
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NEW YORK ( TheStreet) -- Bank of America ( BAC) was the winner among the largest U.S. banks on Thursday, with shares rising 3% to close at $11.52.

The broad indexes advanced despite another day of pessimism over the Fiscal Cliff negotiations in Washington. One day after the Whitehouse said that President Obama would veto a proposal by Speaker of the House John Boehner to avert the fiscal cliff by limiting the increase of federal income tax rates to increase on couples earning $1 million or more per year, if a bill to that effect were passed by the House of Representatives and the Senate, Boehner seemed to draw a line in the sand for Republicans.

Boehner announced during a press conference that his "Plan B" to avert the fiscal cliff would be voted on by the House later on Thursday.

Investors shrugged off the Fiscal Cliff, at least for the day, as the positive flow of economic reports continued. The Bureau of Economic Analysis said that its third reading for third-quarter GDP growth was 3.1%, increasing from its previous estimate of 2.7%. Of course, the fourth-quarter is likely to show a slower GDP growth rate because of Hurricane Sandy.

The National Association of Realtors reported that existing-homes sales rose 5.9% to a seasonally adjusted annual rate of 5.04 million in November from a downwardly revised 4.76 million in October. The consensus was for November sales at an annual rate of 4.87 million, according to Briefing.com. November sales were up 14.5% from a year earlier.

The KBW Bank Index ( I:BKX) was up over 1% to close at 51.90, with al 24 index components showing gains, except for Huntington Bancshares ( HBAN), which was down a penny to close at $6.39.

Bank of America's shares have now returned 108% year-to-date, following a 58% decline during 2011. Despite the remarkable run this year, the shares are still down 13% since the end of 2010.

The shares are still discounted, at 85% of their reported Sept. 30 tangible book value of $13.48, however, the shares appear relatively expensive in the current environment for large-cap bank stocks, at 12 times the consensus 2013 EPS estimate of 96 cents, among analysts polled by Thomson Reuters. The consensus 2014 EPS estimate is $1.25.

Heading into the new year, Bank of America's long-suffering shareholders are looking for a significant capital return, following the next round of Federal Reserve stress tests, with many analysts expecting the company to restore a meaningful dividend, as well as being approved to buy back common shares. Atlantic Equities analyst Richard Staite pointed out on Dec. 13 pointed out that the company had met its fully phased-in Basel III Tier 1 common equity ratio requirement of 9.0% as of Sept. 30, many years in advance, and estimated the company would be approved to pay out $2 billion in dividends on common shares in 2013, while buying back $4 billion worth of shares.

State rates Bank of America "Overweight" with a $12 price target, and is out in front of the consensus, estimating the company will earn $1.23 a share in 2013, with EPS increasing to $1.53 in 2014.

Oppenheimer analyst Chris Kotowski has a different view, rating Bank of America "Market Perform," while trailing the consensus with a 2013 EPS estimate of 79 cents.

Kotowski on Thursday said in a report that "our lower revenue assumptions are offset by lower expenses because we assume that the improvement in the housing market, and primarily the drop in foreclosures, will be a tailwind for BAC's expense initiatives, especially in the back half of 2013. Overall, our 2013 estimates are about 18% below consensus, but we believe this is largely cosmetic as our pre-provision earnings estimates are in line but our reserve release assumptions are lower."

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

>Contact by Email.

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.

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