Sterne Agee analysts have released their top bank picks coming out of the 2Q14 earnings across various market caps and on average their price targets represent potential upside of 24%.

Terry McEvoy and team in their report dated August 1, 2014 have assumed an anticipated P/E multiple of roughly 14% based on their 2016 EPS estimate.

Sterne Agee’s Top large-cap picks: Fifth Third Bancorp, SunTrust Banks

Terry McEvoy of Sterne Agee notes Fifth Third Bancorp (NASDAQ:FITB)’s core results were $0.43, which is in-line with their estimate. The analyst points out Fifth Third’s net charge-offs dropped about 40% Q/Q and matched their forecast which is important as investors are focused on 2Q14 credit performance in light of the recent increase in loan losses. The analyst maintains the Buy rating and points out the Q/Q improvements in credit trends are a big positive takeaway from the quarter.

Terry McEvoy also prefers SunTrust Banks, Inc. (NYSE:STI) as its core business and reputation in the marketplace remain favorable. The analyst notes SunTrust’s second quarter results beat the analyst’s estimates thanks to strong investment banking fees and tight expense controls. The analyst reiterates Buy rating on SunTrust.

Top picks among mid-cap growth

Bret Rabatin of Sterne Agee continues to prefer East West Bancorp, Inc. (NASDAQ:EWBC) as the analyst believes forward consensus expectations will rise over the next few quarters. The analyst believes the bank’s profitability will likely remain high despite the interest rate environment.

Peyton Green of Sterne Agee points out that Signature Bank’s capital offerings have almost always been followed up by stronger than anticipated AEA growth due to a pick-up in deposit and / or loan growth. Considering the bank’s business model emphasizes deposit growth, regardless of the rate environment, the analyst believes the likelihood has increased that the bank will post stronger AEA growth than they have modeled.

Terry McEvoy of Sterne Agee notes PrivateBancorp Inc (NASDAQ:PVTB) has turned from the little bank in Chicago to a real and growing commercial banking competitor in Chicago and across the Midwest. The analyst also commends the bank for its positive momentum in their lending and fee business.

Views on Fifth Third Bancorp, SunTrust Banks and other top bank picks

The following table summarizes Sterne Agee analysts’ top bank picks post 2Q14 earning season:

Top bank picks by Sterne Agee SunTrust

Matthew Breese prefers TFS Financial Corporation (NASDAQ:TFSL) considering the termination of the longstanding MOU and quick return to capital deployment. Terry McEvoy of Sterne Agee remains positive on shares of TCF Financial Corporation (NYSE:TCB) as investments made in new lending businesses are bearing fruit.

Among small-cap growth, the Sterne Agee analysts in their report dated August 1, 2014 prefer Ameris Bancorp (NASDAQ:ABCB) as its operating EPS improved significantly, while they remain positive on BOFI Holding, Inc. (NASDAQ:BOFI) as its net interest margin is anticipated to hold up well. The analyst firm also prefers Independent Bank Group for its expected improvement in operating leverage over the next few quarters.

Turning focus towards micro-cap value, the research firm believes Financial Institutions remain attractive at current levels given solid fundamental metrics, while the Sterne Agee analysts prefer Midsouth Bancorp, Inc. (NYSE:MSL) for its solid loan growth coupled with management’s thrust towards its productivity initiatives.

Top banks - 2016 PE metrics SunTrust