Regional bank picks in a pricey sector

JPMorgan's Steven Alexopoulos finds it hard to get enthused about regional banks (KRE -0.4%) after big gains this year have left valuations rich amid a weak macro outlook. But a bank stock analyst has to pick banks, and he does have a few favorites.

For a small-cap growing fast thanks to its focus on loan growth, Alexopoulos has Signature Bank (SBNY) rated a Buy, and for a mid-cap pure play on high net worth and Silicon Valley, First Republic Bank (FRC -0.8%) is the pick.

Alexopoulos also identifies three regionals looking pricey relative to 2014 estimates, but far more attractive based on long-term earnings power. In addition to Comerica (CMA -0.3%) (see earlier), his favorites are Zions Bancorp (ZION -0.7%) and KeyCorp (KEY -0.2%). Alexopoulos notes Key trades at a 26% discount to the broader group of mid-cap banks in his coverage universe.

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