NEW YORK (TheStreet) -- With shares of Bank of America (BAC) rangebound this year between $14 to $18 shares are currently trading around $16, up nearly 5% for the year to date -- how can the second-largest U.S. bank by assets double over the next 12 to 15 months?
Let's clear up one thing: Bofa can only go higher once it's finally done with paying penalties and other costs related to the 2008 financial crisis and its purchase of Countrywide Financial.
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In the meantime, the bank will most likely report a 9-cent loss in the third quarter, its second of the year due to fines or penalties from the mortgage mess during the financial crisis. Bank of America is expected to earn between $1.40 to $1.79 a share in 2015. The estimates reflect that the bank has cleared a majority of its litigation and legal costs from major cases with the Department of Justice and other federal housing agencies from this year.
Even with the almost $26 billion in settlements behind the bank this year, Bank of America is woefully undervalued compared to the other mega-money center banks Citigroup (C) , JPMorgan Chase (JPM) and Wells Fargo (WFC) .
As you can see from the table above, although Bank of America has fared better than Citigroup and JPMorgan in the short term (year-to-date) with a return of 2.9%, it is 2.5 times below the YTD return of the basket of financial institutions held in the Financial Select SPDR ETF (XLF) and well below the five-year period since the 2008 financial crisis of almost 62%. Also, BAC not only has the lowest price to book of this group (including below the industry average) but the lowest of all the largest 25 U.S. banks I follow -- talk about value!
The chart below emphasizes how Bank of America has performed over the last five years compared to the XLF ETF or the average financial institution within the XLF:
Even though the bank has more tripled in price over the last three years since posting a post crisis low of $4.92 set in December 2011, the bank can more the double its current price.