Saturday, 19. August 2017  
05.12.2016 22:30
Author: Nic Wright

STOCK SCREEN: Bank Stocks With Valuation Upside And Good Relative Strength

 

Until the first half of 2016 disinflationary pressures, and negative rates as response, have been a dominating theme for global financials as banks in general underperformed the broad stock market significantly. The anxiety about growth and deflation, monetary uncertainty and concerns that deteriorating credit conditions would handicap financial companies has led to a significant reduction of exposure to the sector and in turn to low valuation and high dividend yields.

 

As 10-year US rates have risen from 1.35 to 2.4 percent since summer, investors take a closer look at the sector again, simply because rising inflation, higher rates in the US, a steeper European yield curve, and higher GDP growth are in general positive for bank stocks. While Net Interest Income margins are still challenging, the bottom on NII-driven earnings downgrades in the banking sector might have come closer. Despite that the final Basel III framework still lacks clarity, some proposals may be softened and softer framework could benefit banks with excess capital and those with capital concerns.

 

In looking for ideas, we screen the sector for stocks with solid Margin-Of-Safety, according to our AVM’s Intrinsic Stock Value estimates, and with Relative Price Strength.

 

Here are the filter criteria:

1. Market capitalization above 10bn.

2. Upside to Intrinsic Stock Value according to our AVM’s Mean Multiple and Graham approach.

3. Relative Strength on a 6 month basis.

 

Here is our list of stocks matching all criteria in alphabetical order. Company names in the table below are linked to the ANALYZER, our single stock analysis tool. Intrinsic Value Model assumptions can be adapted in the MODELER, our modeling and forecasting environment:

CLICK COMPANY NAME FOR DETAILED STOCK VALUE ANALYSIS

LAST PRICE

MARKET CAP.

MEAN MULTIPLE UPSIDE [%]

GRAHAM UPSIDE [%]

PRICE / EARNINGS

PRICE / BOOK

 AGRICULTURAL BANK OF CHINA-A

3.21

1032550

30.3

26.1

5.9

0.8

 BANCO DO BRASIL S.A.

27.17

77853

24.2

90.5

10.0

0.9

 BANCO SANTANDER SA

4.27

62252

1.4

19.5

9.8

0.7

 BANK OF CHINA LTD-H

3.53

1001676

23.7

51.4

6.0

0.7

 BANK OF COMMUNICATIONS CO-H

5.96

415142

52.9

45.1

6.3

0.7

 CHINA CONSTRUCTION BANK-H

5.78

1286296

50.3

59.4

5.7

0.8

 HSBC HOLDINGS PLC

61.05

155850

13.3

0.6

14.1

0.9

 IND & COMM BK OF CHINA-H

4.75

1584413

84.5

39.3

5.8

0.8

 INDUSTRIAL BANK OF KOREA

13050.00

7307724

17.6

74.8

6.3

0.5

 RESONA HOLDINGS INC

550.10

1278497

164.7

97.1

8.0

0.7

 STANDARD CHARTERED PLC

639.30

26729

77.7

41.4

15.4

0.6