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I love this 'damnable' bank stock: Fund manager

Bank of America has a bright future, despite its checkered past, value investor Bill Smead told CNBC on Tuesday.

"We're now officially to the point where the large banks are the damnable ones. They're the ones everybody hates," said the CEO and chief investment officer of Smead Capital Management.

At BofA, he said in a "Squawk Box" interview, "their sins are all 6 to 8 years old. And the good things are all out in their future. Basically, as a value investor that's all you are looking for in this world."

David Paul Morris | Bloomberg | Getty Images

Bank of America is said to be talking about paying $12 billion to settle investigations by the Justice Department and states into the bank's alleged handling of shoddy mortgages before the financial crisis.

Read MoreForeclosures at 8-year low in May: RealtyTrac

"We love the whole banking industry in that 'too big to fail' category because they're the new Philip Morris—the most sued, regulated, politicized, and damned company in the last 50 years," Smead said.

"It also happens to be the best-performing stock on the New York Stock Exchange during that exact same 50 years," he added. (The tobacco company changed its corporate name to Altria Group in 2003.)

Over the next four to five years at BofA, Smead sees normalized earnings of $2.50 a share. This could be a $30 stock in five years, he said, nearly double current levels.

Bank of America is No. 4 among the top 10 holdings of the Smead Value Fund, of which Smead is lead portfolio manager. The fund has $726 million in assets under management. It's up 23 percent over the past five years.

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