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Bank of America Corp (BAC), Regions Financial Corporation (RF) & PNC Financial Services (PNC): Three Attractive Banking Stocks to Consider Now, One to Avoid

Better days ahead

PNC Financial Services (NYSE:PNC) had a rough 2012, primarily due to repeated reserve provisions made to offset government agency demands for mortgages, primarily made by acquired companies last decade. But things are off to a much better start this year, with first-quarter earnings of $1 billion, or $1.76 per share. This was a substantial jump from the first quarter of 2012, during which the company reported earnings of $811 million, or $1.44 per share. The earnings were an admirable 1.3% return on assets, and 12% above analysts’ projections of $1.57 a share.

The gains were a balanced mix of revenue enhancements due largely to the inclusion of the a full quarter of the 2012 acquisition of the American retail branches of Royal Bank of Canada (USA) (NYSE:RY). Non-interest expenses declined by $140 million from the first quarter of 2012, and a whopping $430 million from the fourth quarter of 2012. The company raised its dividend by 10% to $1.76 annually earlier this spring. I see PNC Financial Services (NYSE:PNC) as fairly valued today at a PEG of 1.3, but to the conservative or income-oriented investor, this stock may hold some appeal.

A rising star?

A smaller bank with more upside I have been looking at is Susquehanna Bancshares Inc (NASDAQ:SUSQ). This Pennsylvania-based bank with a little under $20 billion in assets was slow to recover from last decade’s industry crisis, but its recovery is ongoing. In its first quarter, earnings came to $42.4 million, or $0.23 per share, very nearly doubling last year’s first quarter. But still, earnings only came to a 0.9% return on assets.

Susquehanna Bancshares Inc (NASDAQ:SUSQ) is in growth mode, with loans up 30% over the past two years, and I expect earnings this year of near $1.00 per share, which would be a 25% jump from 2012, and a 150% jump from 2011. Over the next year, I expect the company’s stock to outperform the market.

Conclusion

All of these banks have aspects that are very appealing to the investor. It is a question of how much risk you are willing to accept. Bank of America Corp (NYSE:BAC) has plenty of upside, but nearly as much downside. Regions has ridden its recovery wave pretty much to its conclusion, now it is time to grow its loan portfolio. Susquehanna Bancshares Inc (NASDAQ:SUSQ) is benefiting from past acquisitions, and still must show continued growth while controlling expenses, and PNC Financial Services (NYSE:PNC), I believe, is well positioned for the next two years or more.

The article 3 Attractive Banking Stocks to Consider Now, 1 to Avoid originally appeared on Fool.com and is written by Bill Edson.

Bill Edson has no position in any stocks mentioned. The Motley Fool owns shares of Bank of America and PNC Financial Services. Bill is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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