3 Undervalued Money Center Banks Offering an Opportunity for Growth: Citigroup Inc. (C)

JPMorgan is trading at 5% discount to its book value, which is $51.27. Analysts covering the stock have a consensus outperform recommendation for JPMorgan, with 34.3% of them recommending their investors buy the stock, while 48.6% rate the stock outperform. None of the analysts recommend their investors sell this bank. JPMorgan has an average daily trading volume of 20 million shares a day, with regards to its forward earnings, the bank is trading at 8.2 times, which is also very cheap. Therefore, this bank is an excellent investment opportunity.

PNC Financial Services (NYSE:PNC)

PNC Financial is considered to be one of the largest commercial real estate lenders in the US and the availability of cheap funds tops the wish list of commercial real estate sector.

Among other highlights of the recent quarter’s performance, the bank reported improved fee income and stronger than expected net interest income. Asset quality, as represented by net charge-offs came in at 0.67% of average loans, compared with 0.73% in the prior quarter, while net interest margin grew 3 basis points to 3.85% sequentially and has continued to hover around this range over the past 5 years.

Over the past three years, PNC has experienced growth in the number of customers in all four business segments. Its residential mortgage loans segment originations reached $15.2 billion, up 33% from a year ago and core net income for 2012 increased 12%. Going forward, the bank is expected to benefit from lower funding costs, organic growth and Southeast expansion.

With a daily average trading volume of 2.4 million shares and a book value per share of $67.05 at the end of the fourth quarter of 2012, PNC Financial is trading at 7% discount to its book value. The bank reported 9% increase in its fourth quarter book value compared to the prior year end. Analysts covering the stock have a consensus outperform recommendation for PNC Financial. Only 2 analysts rate PNC Financial underperform. I have a year-end target price of $68 for PNC, which represents an upside of 8%.

Conclusion

I believe the above short-listed stocks are the best way to play the US money center banks. These banks provide the required liquidity as represented by their daily trading volumes, while their attractive valuations provide investors with upside potential, which is also supported by consensus recommendation.

The article 3 Undervalued Money Center Banks Offering an Opportunity for Growth originally appeared on Fool.com and is written by Adnan Khan.

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