Best Financial Stock Picks for 2012, analysts Barclays Capital

Best Barclays Financial Stock Picks for 2012 : While the analysts are underweight financials and other cyclicals in what they expect to be a range-bound market for stocks in 2012, they do expect select outperformers within the sector and the analysts offer an upside/downside scenario for each stock.

Citigroup
Citigroup will likely outperform other large-cap bank stocks, according to analyst Jason Goldberg. The stock is expected to benefit from a resumption of capital deployment through dividend increases and buybacks, further downsizing of non-core assets, continued focus on expenses, growth in emerging market footprint among other factors.

The stock is suffering from an "acute valuation discount" according to the analyst, trading as it does at 50% of its tangible book value.

"We see the greatest potential source of upside driven by a near-term resolution to the euro zone crisis which helps both its Securities & Banking (improved capital markets and investment banking) and Transaction Services (higher market values) units and should materially improve investor sentiment," Goldberg wrote.

Barclays has a $50 price target on the stock, assuming a multiple of 11 times 2012 EPS.

Upside: In an optimistic scenario, shares could have a price target of $61, representing a more than 125% upside from current levels.

Downside: In a downside scenario, the stock could slide back to $21, which is about a 20% decline from the current market price of $27. The downside assumes a 100% write-off of its $20.6 billion GIIPS exposure, its entire $50.4 billion deferred tax assets and all of the $7.4 billion difference between fair value of its loans and carrying value. Goldberg has the stock trading at 0.8 times its stressed tangible book value of $26.03 in the downside scenario.

American Express
American Express will is poised to outperform as it continues to benefit from double-digit growth in card spends supported by market share gains and operating leverage and better-than-expected expense management, according to Mark Devries. The stock has a $60 price target based on roughly 14 times its $4.40 earnings per share estimate, which could mean a 25% upside from the current market price of $48.

Upside: If global business grows 15% in 2012 (versus 11% base case) and expense management better than expected, the company could earn $4.80 per share in 2012, and could command a 15 multiple, giving it a price target of $72, or a 50% upside.

Downside: If the U.S. economy enters a downturn that results in a 5% decline in billed business and a 100 basis point increase in charge offs, the stock could trade down to $32, or a 33% downside.

MetLife
MetLife is the top pick in the Life Insurance sector for Barclays Capital Analyst Jay Gelb. "We anticipate the acquisition of Alico will be a large contributor to increased revenues and operating earnings over the next several years," he wrote. MetLife also expects to deploy $3.5 billion of excess capital and resume buybacks in 2012. The analyst has a $40 price target, implying a 29% upside from these levels.

Upside: Shares could climb to $46 on the upside if valuation multiple expands to 9 times 2012 earnings per share

Downside: Shares could slide to $27 if the stock trades at near its historical low at a multiple of 5 times its 2012 earnings per share. (source http://www.thestreet.com )
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