4 Bank Stocks To Consider Buying Now

Includes: BAC, C, FITB, JPM
by: Leonid Kanopka

Bank stocks are very shaky and risky in the current markets, but I feel there are a few "diamonds in the rough" worth looking into. Below is an analysis on 4 bank stocks that I feel will see huge gains in the coming years. I feel that there might be a few downward trends, but in the long run at these prices these banks will see huge profits.

Bank of America Corporation Common Stock (NYSE:BAC) Yes I did say Bank of America, the second biggest bank holding company in the U.S. by assets, and although very controversial it has proved its name throughout time. The current stock price is $5.60 and I believe this is a complete steal. Unfortunately the price is not as low as in March 2009, but it is fairly close. The one-year analyst price target is $9.90, which represents a 76.79% upside potential. I feel this number could be even higher in 2013 and beyond. The current dividend yield is 0.7%, and the current book value is $20.80. BAC is in lots of trouble in part due to its acquisition of Countrywide, which has plagued its balance sheet, but BAC is truly "too big to fail." The bank has been selling its toxic assets in order to clean its balance sheet and get back to positive earnings. It has begun to listen to the customer, and is doing everything to keep its attrition low (hence the removal of the $5 fee). On October 18, 2011, Bank of America reported its 3Q11 earnings results. The company reported earnings of 0.56 per share, substantially exceeding the Zacks consensus estimate of $0.20. This was also a far cry from the loss of $0.77 in the prior-year quarter. The sale of non-core assets and accounting gains made it possible for the company to swing to profit. BAC's 7.0 forward P/E is at the low end of its 5-year range (lowest 5.3 to highest 100.0). This bank is not going anywhere, and I feel it is poised for a major turnaround.

Fifth Third Bancorp (NASDAQ:FITB) is a diversified financial services company. The Bancorp operates in four business segments: Commercial Banking, Branch Banking, Consumer Lending and Investment Advisers. The current market price is $11.96 with a one-year analysts' price target of $14.28. The stock has a 4-star S&P rating and higher than expected earnings for the last five quarters. Despite the 14% increase for the month, FITB's current forward PEG of 0.3 represents an 86% discount to its Banks sub sector average. Also, the current trailing P/E of 10.2 represents a 48% discount, further proving the great buy opportunity. Another key point to keep in mind is FITB offers a dividend yield of 2.7% for added income.

Citigroup, Inc. Common Stock (NYSE:C) Yet another struggling bank, but a bright future when taking history into consideration. Current stock price is $27.66 with a one-year analysts' price target of $43.86. This represents a 58.6% upside potential, but again I feel it could increase even more in the long run. The current dividend yield is 0.1% (not to mention recent talks of increasing dividend), and book value is $60.56. C has a current EPS of 3.75 and a P/E ratio of 7.47x. Fundamentally, this bank is doing better than Bank of America, but is not as big. Also, a global distribution network gives Citigroup an edge over its domestically focused peers. Lastly, Citigroup has a substantial presence in the emerging markets, enabling it to offer client access and insight into the highest growth areas of the world.

JP Morgan Chase & Co. Common Stock (NYSE:JPM) is another financial holding company that is worth getting into while it is still near its 52-week low. Currently it is trading at $32.35 with a one-year analysts' price target of $46.97. This represents a 45.20% upside potential. Current dividend yield for JPM is the best of the group at 3.1%, and EPS is highest as well at 4.69. Current book value is $44.79, which shows the company is highly undervalued and ready for growth, especially since it is floating close to its 52-week low of $27.85. This bank's historical earnings have been very good, and it is currently very well capitalized. Recently JP Morgan has taken the title of the biggest bank in the U.S. from Bank of America. Also, JPM is the industry leader in innovated banking, which allows it to grab more market share while retaining its customers. Overall JPM is an excellent pick for a long-term investor.

Disclosure: I am long BAC, FITB.