Bank of America: Financial Winner

NEW YORK ( TheStreet) -- Bank of America ( BAC) was the winner among the largest U.S. banks on Tuesday, with shares rising over 3.5% to close at $11.88.

Stocks were strong across the board, as investors cheered a report showing continued service-sector growth in the United States. Financial names led the way, with the KBW Bank Index rising 2% to close at 54.90 with all 24 index components seeing gains for the session.

The Institute for Supply Management's Non-Manufacturing Index showed a decline to 55.2% in January from a downwardly revised 55.7% in December. An index reading above 50 indicates economic expansion. The January reading matched the consensus estimate among economists, according to

Also on Tuesday, CoreLogic said that home prices rose 8.3% in December from a year earlier, for their largest year-over-year gain in six years.

Bank of America

Bank of America's shares have now returned 2% year-to-date, following a 110% return during 2012. Last year's stellar return was a partially recovery from the stock's 58% drop during 2011. The shares are still down 11% from the end of 2010.

Bank of America' shares trade for 0.9 times their reported Dec. 31 tangible book value of $13.36, and for 9.2 times the consensus 2014 EPS estimate of $1.29, among analysts polled by Thomson Reuters. The consensus 2013 EPS estimate is 98 cents.

The shares may not be trading at a discount to book value very much longer. Guggenheim analyst Marty Mosby on Tuesday reiterated his "buy" rating for Bank of America and raised his price target for the shares by to $15 from $14, while predicting that the shares would trade above tangible book by the end of the year.

Bank of America has been paying a nominal quarterly dividend of one cent a share for several years, as the company has worked through problem loans and shored up its capital base. The company estimated that its Basel III Tier 1 common equity ratio was 9.25% as of Dec. 31. This exceeds the expected ultimate requirement of 9.0%, which is not expected to be phased-in until January 2019, under the Federal Reserve's proposed capital rules.

Mosby estimates that following the completion of the this year's regulatory stress tests, Bank of America will receive Federal Reserve approval to raise its quarterly dividend to 5 cents a share from the current nominal quarterly payout of 1 cent.

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-- 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.