Make Some Bank on Bank of America

NEW YORK (TheStreet) -- Bank of America (BAC) looks primed for a big run, and expectations of a 70% return over the next 12- to 18-months are hardly out of the question. Let's take a look at the numbers.

Bank of America is the most undervalued with its price to book of 0.86 times, while both JPMorgan Chase (JPM) and Wells Fargo (WFC) are fully valued at 1.14 times and 1.68 times book, respectively. 

Citigroup (C) is also undervalued at 0.77 times book but I am not a fan of the 10 to 1 reverse split the bank did in May 2011. The stock was a split-adjusted $44.16 on May 9, 2011 with the current close at $50.08 on Friday or a gain of 13.5% over almost three years for an average annual return of just 4.5%.The post-crisis high of Citigroup stock since 2009 is $55.20 set on Jan. 6, only two months ago.

Bank of America (which never split its stock) remains below its post-crisis high of $19.86 set on April 15, 2010, when much of toxicity of the mortgage mess was still on its books. The bank is much leaner, and better managed now.

It remains the second-largest bank in the U.S. based on asset size at the end of 2013. Under current CEO Brian Moynihan, who took the helm in 2010, the bank has rid itself of most of its non-performing assets (adjusted non-performing loans are 2.39% at fourth quarter of 2013, a nearly 40% improvement from just two years ago). It has taken huge write-downs which cost them earnings and settled most major litigation suites.

The balance sheet is much cleaner and earnings potential is strong given the economic improvements in the U.S. and favorable long-term-rate environment going forward, since the easing of Fed tapering which should improve margins. In fact revenues have already increased by 7% in fiscal 2013, from $83.3 billion in 2012 to $88.9 billion.

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