- Second place goes to Regions Financial (RF) of Birmingham, Ala., with shares rising 67% through Monday's close at $7.12, following a 38% decline during 2011. The shares trade just above tangible book value, and for 9.3 times the consensus 2013 EPS estimate of 77 cents. The consensus 2014 EPS estimate is 82 cents. Regions during the first quarter sold its Morgan Keegan brokerage subsidiary to Raymond James Financial (RJF) for $900 million and raised $930 million in common equity through a public offering. The company then redeemed in full the $3.5 billion in preferred shares held by the U.S. Treasury for bailout money provided through the Troubled Assets Relief Program in November 2008. Credit Suisse analyst Craig Siegenthaler in November estimated that after the Federal Reserve completes its next round of bank stress tests in March, Regions will be approved to raise its quarterly dividend from a penny to four cents, and to buy back $249 million worth of shares during 2013.
- Third place goes to SunTrust (STI) of Atlanta, with shares returning 62% to close at $28.35, following a 40% drop during 2011. The shares now trade for 1.1 times tangible book value, and 10.5 times the consensus 2013 EPS estimate of $2.71. The consensus 2014 EPS estimate is $3.01. SunTrust during the third quarter made several moves to shore up its balance sheet and capital ahead of the stress tests, including the sale of its stake of Coca-Cola (KO) resulting in a pre-tax gain of $1.9 billion. Bank of America Merrill Lynch analyst Erika Penala on Nov. 26 estimated that SunTrust in March would be approved to increase its quarterly dividend from a nickel a share to 15 cents, while also repurchasing $565 million in common shares during 2013.
- Citigroup (C) was in fourth place, with shares returning 51% through Monday's close at $39.56, following a 44% decline in 2011. Citi now trades for 0.8 times tangible book value, and for 8.5 times the consensus 2013 EPS estimate of $4.65. The consensus 2014 EPS estimate is $5.14. The company on Dec. 5 announced a series of moves to cut its annual expenses by $900 million in 2013, with total expense savings increasing to $1.1 billion in 2014. The cuts included 84 branches and 111,000 layoffs, and Citi estimated that its annual revenue would decline by only $300 million. Marty Mosby of Guggenheim Securities estimates that Citigroup had $14.9 billion in excess capital as of Sept. 30, and also estimates that following the next round of stress tests, the company will receive Fed approval to raise its quarterly dividend from a penny to 25 cents a share, with the company holding off on share buybacks for another year.
- Capital One (COF) ranked fifth among the 24 components of the KBW Bank Index, with shares returning 37.5% in 2012 through Monday's close at $57.93, following a flat return in 2011. The shares trade for 1.5 times tangible book value, and for 8.3 times the consensus 2013 EPS estimate of $7.01. The consensus 2014 EPS estimate is $7.38. The company in February acquired ING Direct (USA), followed by a $1.25 billion common equity raise in March, and the purchase of HSBC's (HBC) U.S. credit card portfolio in May, for a premium of $2.5 billion. The ING deal included roughly $80 billion in deposits gathered over the Internet, along with $41 billion in loans, providing plenty of liquidity for the $28.2 billion in credit card loans acquired from HSBC. The third quarter was the company's first "clean" quarter in 2012, with a return on average tangible common equity of 21.48%. FBR analyst Paul Miller on Dec. 19 included Capital One among his list of "stocks to own for 2013," with a price target of $72, saying the company is "one of our favorite names due to its compelling valuation ($72 target = 10x our FY13 EPS estimate and 1.1x book value), expected resumption of the dividend, and increased earnings power."
Email. Follow @PhilipvanDoorn