Which Big Bank Is the Best Stock to Buy for 2014?

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The country’s largest banks have had a pretty good year so far in 2013 and an even better trailing 12 months. Nothing seems to be able to quench investors’ appetite for bank stocks, including record fines and penalties. The reason, of course, is the Federal Reserve’s quantitative easing program and low interest rates.

But taper talk is revving up again following Thursday’s speech by outgoing Fed Chairman Ben Bernanke. What happens if the Fed begins to cut its $85 billion monthly asset purchases but leaves interest rates alone? That will be something for Janet Yellen to decide, most likely. And what the Fed decides could have a significant impact on how big bank stocks perform next year.

With that in mind, we took a look at the country’s four largest banks — J.P. Morgan Chase & Co. (NYSE: JPM), Wells Fargo & Co. (NYSE: WFC), Bank of America Corp. (NYSE: BAC) and Citigroup Inc. (NYSE: C) — with an eye to seeing whether there is a value play among them.

J.P. Morgan Chase & Co. (NYSE: JPM) has seen its shares rise 29% so far in 2013. The stock is currently trading at around $56.80, and the consensus analyst price target of around $62.70 implies upside of 10.4%. Shares have traded in a range of $39.88 to $56.93 over the past year. With a 2014 earnings per share estimate of $6.02, it is valued at more than nine times next year’s expected earnings.

Wells Fargo & Co. (NYSE: WFC) is also up 29% so far in 2013. Warren Buffett’s favorite bank is currently trading at about $44.00, and its consensus analyst price target of around $46.10 implies upside of 4.8%. Its shares have traded in a range of $32.12 to $44.79 over the past year. With a 2014 earnings per share estimate of $4.01, it is valued at nearly 11 times next year’s expected earnings.

Bank of America Corp. (NYSE: BAC) has seen its shares rise by more than 31% so far in 2013. The stock is currently trading at around $15.25, and the consensus analyst price target of $15.26 implies that the stock is fully valued. Shares have traded in a range of $9.38 to $15.31 over the past year. With a 2014 earnings per share estimate of $1.34, Bank of America is valued at more than 11 times next year’s expected earnings.

Citigroup Inc. (NYSE: C) is still in turnaround mode, but its shares are up more than 29% year to date. Citigroup’s stock is currently trading at $51.30, and the consensus analyst price target of around $59.10 implies upside of 15.2%. Shares have traded in a range of $34.04 to $53.56 over the past year. Analysts forecast 2014 earnings per share of $5.43, and Citigroup is valued at more than nine times next year’s expected earnings.

The bank with the highest upside potential is Citigroup, followed by J.P. Morgan. As noted, Citigroup is in the midst of a turnaround, so the potential gain is no surprise. What is surprising is how well Citigroup has been executing its turnaround. Now if it would only do something about that $0.01 quarterly dividend. Bank of America pays the same, while both J.P. Morgan and Wells Fargo pay dividend yields of 2.7% and 2.8%, respectively. Still, as a value play, Citigroup looks like the best choice, followed by J.P. Morgan.

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