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10 Bank Stock Value Picks

Tickers in this article: COF JPM BPOP DRL BAC PNC C RF OFG BFIN

The company owes $935 million in TARP money.

Popular reported second-quarter net income applicable to common stock of $64.8 million, increasing from $47.5 million in the first quarter, but declining from $109.8 million during the second quarter of 2011.

The main item driving the sequential improvement and year-over-year decline in earnings was Federal Deposit Insurance Corporation loss-share coverage of assets acquired from the failed Westernbank Puerto Rico in April 2010. Popular booked $2.3 million in loss-share income on During the first quarter, compared to loss-sharing expenses of $15.3 million in the previous quarter, and loss-share income of $38.7 million a year earlier.

Morgan Stanley analyst Ken Zerbe rates Popular "Overweight," saying the company has "made meaningful progress in addressing its sizable credit issues by aggressively building reserves, shrinking its US business, and raising capital (T1C is now 12.3%)."

"While commercial and residential credit in Puerto Rico remain weak, Popular has returned to profitability, has the dominant franchise in Puerto Rico, and an attractive valuation that more than reflects potential credit concerns."

BPOP ChartBPOP data by YCharts

Interested in more on Popular, Inc.? See TheStreet Ratings' report card for this stock .

3. Citigroup
Shares of Citigroup (C) closed at $28.90 Friday, returning 10% year-to-date, following a 44% decline during 2011.

The shares trade for 0.6 times tangible book value, and for 6.4 times the consensus 2013 EPS estimate of $4.54. The consensus 2012 EPS estimate is $4.09.

For very patient investors, Citigroup could turn into a capital return story. The company reported in its second-quarter 10-Q filing on August 3 that it had "$51 billion of net deferred tax assets at June 30, 2012," and that "approximately $11 billion of such assets were includable without limitation in regulatory capital pursuant to risk-based capital guidelines, while approximately $35 billion of such assets exceeded the limitation imposed by these guidelines and, as 'disallowed deferred tax assets,' were deducted in arriving at Tier 1 Capital."

As Citigroup continues to turn profits and winds down its Citi Holdings Subsidiary, there's quite a bit of potential for excess capital to be returned to investors.

Atlantic Equities analyst Richard Staite had said on July 17 that "given that Citigroup has $151bn of tangible common equity but only needs $88bn to run Citicorp it shows that there is a further $63bn that is currently trapped within Citi Holdings and the DTA."

"This is capital that should be available to be returned to shareholders at some point assuming the group can utilize the DTA and that the $10bn of loan loss reserves within Holdings is sufficient to cover losses," Staite said, adding that the "timing of the capital return is highly debatable and clearly the Fed took a cautious view early this year."