Wall Street often operates inside what seems to be a vacuum, and once an idea becomes hot, everybody seems to want to follow it. One big trade that became hot earlier this year when rates appeared ready to rise, was to sell the big money center banks and buy the top regional names. The thought was that regional banks tend to do better in a rising interest rate environment and also don’t have the headline and legal risk the big boys do.

In a new Oppenheimer research report, while analysts agree the trade has been solid, they also point out that the regionals are now trading at a large and perhaps unwarranted premium to the three top money center banks. They also make the case that the money centers’ consumer businesses are considerably more profitable than those of the regionals and that the commercial businesses are roughly comparable. In addition, the money centers have processing, credit card, and wealth and asset management businesses that should be much more highly valued. The bottom line message is to sell the full-valued regionals and buy the value in the big banks.

Bank of America Corporation (NYSE: BAC) is rated at Outperform and remains perhaps the perfect contrarian pick. A huge accounting snafu hurt the stock in the spring, and the government is still looking to get another $14 billion to $16 billion from the bank in yet another legal settlement on bad mortgages. In adding up the sum-of-the-parts value for the stock, which trades at a deep discount to regional metrics, the Oppenheimer analysts see a $21 value. It is also important to remember the huge impact that Merrill Lynch has on the bottom line. Investors recently got a boost in the dividend, which is now up to 1.3%. The Oppenheimer price target for the much maligned bank is $19. The Thomson/First Call consensus price target is $17.32. Shares closed Thursday at $15.32.

Citigroup Inc. (NYSE: C) has been a poor performer this year for investors and portfolio managers and is still down more than 10% year-to-date. The bank trades at a very reasonable 11.3 times trailing earnings and is down 16.5% from highs printed last year. With loan activity and other banking services starting to ramp up as the economy improves over the second half, adding this quality large cap bank to a portfolio at an incredibly low price makes good sense. Especially when the sum-of-the-parts value from the Oppenheimer team for Citigroup is $67. Investors are paid a miniscule 0.1% dividend. Oppenheimer’s actual target price is $68, while the consensus is much lower at $58.06. The stock closed Thursday at $49.13. A trade to the target would be a strong 38% gain.

JPMorgan Chase & Co. (NYSE: JPM) is the third top money center bank rated Outperform at Oppenheimer. The company may be nearing the end of a very long stretch of losses and penalty payouts like the other big bank brethren. Between mortgage settlements and trading gaffes, the company has taken a PR beating and has still held up reasonably well. CEO and Chairman Jamie Dimon’s recent disclosure of throat cancer is not expected to change the hierarchy or executive structure at the bank. The Oppenheimer team projects a sum-of-the-parts value for the mega-cap giant at $70. Investors are paid a 2.8% dividend. The Oppenheimer price target is set at $73, and the consensus is posted at $66.56. Shares closed Thursday at $56.98.

The big banks clearly offer investors value in what is a pricey market that appears to be teetering a touch. All three have extensive businesses and multiple revenue channels, much larger and more extensive than the regionals, and much better priced for investors at this juncture.

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