10 Bank Stock Value Picks

Expense control. With the largest banks seeing major pressure on their trading and capital markets revenue, while the smaller banks suffer from margin pressure and slow demand in several loan categories, many banks have large, even branded, efficiency initiatives in place. A bank's efficiency ratio is, essentially, the number of pennies of overhead expense incurred for every dollar of revenue. KBW said the median second-quarter efficiency ratio in its coverage universe was 63.11%, improving from 63.65% in the first quarter, and 64.09% in the second quarter of 2011.

Return of Capital. After the Federal Reserve completed its annual stress testing of large banks' capital plans in March, many of the biggest players immediately announced dividend increases and significant stock buyback programs. Some banks were required to submit updated capital plans, and some elected to wait another year before requesting permission from the Fed. Investors are clamoring for more dividends, and buybacks, of course, lower the number of outstanding shares, which increases analysts' earnings estimates, supporting higher share prices.

Here are the 10 cheapest bank stocks, among actively traded names, to 2013 earnings estimates, counting down by declining forward P/E ratio:

10. PNC Financial Services Group
Shares of PNC Financial Services Group (PNC) of Pittsburgh closed at $60.73 Friday, returning 7% year-to-date, following a 3% decline during 2011.

The shares trade for 1.2 times tangible book value, according to Thomson Reuters Bank Insight, and for 8.9 times the consensus 2013 earnings estimate of $6.82 a share. The consensus 2012 EPS estimate is $5.67.

Based on a quarterly payout of 40 cents, the shares have a dividend yield of 2.63%.

PNC reported second-quarter earnings of $546 million, or 98 cents a share, declining from $811 million, or $1.44 a share, during the first quarter, and $912 million, or $1.67 a share, during the second quarter of 2011.

The second-quarter results included previously announced mortgage putback charges of $284 million, or 54 cents, and $119 million in other charges for trust preferred redemptions and merger integration expenses related to the acquisition of RBC Bank (USA) in March.