NEW YORK (TheStreet) -- Based on consensus price targets among analysts polled by Thomson Reuters, TheStreet has identified the 10 actively-traded bank stocks with the most upside potential over the next year.
This new list is even more speculative since it is based almost entirely on the mean price targets among analysts polled by Thomson Reuters, although the group is limited to holding companies with average daily trading volume of at least 100,000 share over the past three months. Some of the listed companies have significant problem assets to work though. Still, some analysts consider them sufficiently undervalued relative to future earnings for patient investors who can handle volatility to consider as part of a balanced investing approach. We did exclude one holding company meeting the criteria -- Capitol Bancorp (CBC) of Lansing, Mich. -- since it reported negative regulatory capital ratios as of September 30. Keep in mind that the consensus price targets can be skewed, since most analysts with neutral ratings on shares don't provide price targets. Out of the 10 holding companies listed below, only four have strong positive sentiment among analysts and only two have a majority of analysts rating the shares a buy. Still, even among analysts with neutral ratings have price targets indicating tremendous upside Here's the list in ascending order by upside potential based on Friday's market close and consensus price targets. 10. Capitol Federal Financial Company Profile Shares of Capitol Federal Financial (CFFN) of Topeka, Kan. closed at $23.29 Friday, declining 15% over the previous year. Based on a quarterly payout of 50 cents, the shares have a very attractive dividend yield of 8.59%. The company was recently featured in Dan Freed's 5 Bank Stocks with Big Dividends. Capitol Federal is organized as a mid-tier holding company, with 29% of its common shares owned by the public, and the rest controlled by a mutual holding company. The mutual holding company generally waives its dividends, only collecting payments when they're needed to cover operating expenses. The mutual holding company structure can be confusing, because at first glance it appears the company is paying out more than it earns. For example, during the company's fiscal year ending on September 30, Capitol Federal Financial paid-out $2.29 in dividends per share, while earning 93 cents a share. But since the dividends were only paid on public shares, the company was really paying out far less than it earned, since net income came to $3.22 per public share. Moving forward, Capitol Federal is in the midst of a "second-step conversion," where the 71% of common shares controlled by the mutual holding company will be sold to the public. Then the mutual holding company will disappear, leaving just the successor holding company, Capital Federal Financial, Inc. The initial offering will close on December 7. Income Statement For the fiscal year ended September 30, Capitol Federal Financial earned $67.8 million, or 93 cents a share, increasing from $66.3 million, or 91 cents a share, for fiscal 2009 and $51 million, or 70 cents a share in fiscal 2008. The company's return on average assets (ROA) for fiscal 2010 was 0.80%, compared to 0.81% the previous year and 0.65% in fiscal 2008. The net interest margin - the difference between the average yield on loans and investments and the average cost of funds -- for fiscal 2010 was a relatively low 2.06%, but the company maintained strong asset quality and a competitive efficiency ratio of 43.99%. A bank's efficiency ratio is essentially its noninterest expense divided by its interest and noninterest income. Lower is better. Capitol Federal's efficiency ratio for the third calendar quarter of 48.32% was only bested by one other company listed here, Intervest Bancshares (IBCA), which had an efficiency ratio of 43.43%. Balance Sheet Total assets were $8.5 billion as of September 30. Main thrift subsidiary Capitol Federal Savings Bank was strongly capitalized with a Tier 1 leverage ratio of 9.77% and a total risk-based capital ratio of 23.80%, , greatly exceeding the 5% and 10% required for most banks to be considered well-capitalized by regulators. The nonperforming assets ratio - including loans past due 90 days, nonaccrual loans and repossessed assets -- was a low 0.45%. The holding company's tangible common equity ratio was a very strong 11.33% as of September 30, according to SNL Financial. Stock Ratios The shares trade for 1.8 times tangible book value according to SNL and 7.2 times the $3.22 per public share the company earned during fiscal 2010. Forward P/E ratios will be a far simpler matter once the second-step conversion is completed. Analyst Ratings Out of five analysts covering Capitol Federal Financial two rate the shares a buy, while the other three recommend investors hold the shares. 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