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Like the US economy and stock market, 2019 was a good year for US banks. Bank shares rose more than 20%, nearly keeping pace with the S&P 500 index, and the industry posted a record $180 billion in profits over the first three years. quarters of the year. Only 4% of banks across the country were unprofitable last three months and problem banks, as defined by the Federal Deposit Insurance Corporation, fell to their lowest level since before the financial crisis.
Top Three Banks In America
"2019 was a great year to be a banker," says Frederick Cannon, director of research at Keefe, Bruyette & Woods, an investment bank focused on the financial sector. "The profitability of the banking industry is very strong and it is healthy in a good way. The return on assets is close to maximum levels."
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In early 2019, banks ended a 12-month period where they hit new highs in profitability, boosted by President Trump's tax cuts and Federal Reserve interest rate hikes Reserve, which helped lower profits. . But banking stocks and the broader market held up in 2018 after one of the heaviest December selloffs on record. In response, the Fed not only halted its interest rate hikes, but also cut rates three times during 2019 as the fed funds rate fell from 2.25 to 2.5% for 1.5% to 1.75%.
The rate cuts for major lenders, especially America's largest consumer and trust banks, have put some interest rate-sensitive profit centers in jeopardy. (Banks generate most of their money by capturing the spread between the interest earned on loans versus the interest paid to depositors.) But the cut added new fuel to a stock market. decades-old bulls. US stock markets returned 29% in 2019, driven by low rates and record low unemployment. That economic background showed a good balance for the CEO of the banks, who did not have to worry about the imminent change in the economy.
"The cutting cycle stabilized the economy and therefore bank credit," says KBW's Cannon. "While I think bankers may regret the fact that the Fed has taken another route to raise its rates, it is more important for banking investors and bankers that the economy remains stable and that we avoid a deficit of ' credit."
United States There are more than 5,000 banks and savings institutions in the United States, but assets are increasingly concentrated at the top. The largest 100 had $14.4 trillion in assets, more than the total of the U.S. It represents 81% of banking assets. Asset quality and returns vary widely between those institutions. With that in mind, let's examine the financial data to evaluate America's best banks.
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Born out of the financial crisis of the late 2000s, this is the eleventh straight year for data on growth, credit quality and profitability, and savings from the assets of the 100 largest publicly traded banks. The ten metrics used in the ranking are based on regulatory filings up to September 30. Data courtesy of S&P, but ratings are made by only.
Metrics include return on average tangible common equity, return on average assets, net interest margin, efficiency ratio and net charge as a percentage of total loans. Non-performing assets as a percentage of assets, CET1 ratio, risk-based capital ratio and reserves as a percentage of non-performing assets were also considered. The final component is operating income growth. We excluded banks where the top-level parent is based in the United States. are outside.
Citizens Business Bank's parent company, CVB Financial, has established Arkansas-based Home Bancshares as the top-rated bank in the United States. The Ontario, California-based small business lender was in the top 20 in every metric tracked, and shone most in its efficiency ratio (40%), operating income growth (42 %) and posted a negative net payout ratio. The average bank listing, in contrast, had an efficiency ratio of 57%, posted operating growth of only 5.4%, and experienced payments at a rate of 0.17% of the average loan. Founded in 1974 and with more than $11 billion in assets and more than 50 branches in the state of California, CVB has seen profit growth for 170 consecutive quarters.
The top three banks on the Best Banks list came from California, with Santa Clara-based SVB Financial ranked second and Irvine-based Pacific Premier Bancorp ranked third. Home Bancshares, which was the highest rated bank for the last two years, ranked #4.
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Smaller banks and those focused on commercial lending dominated the top tiers of the Best Banks list. None of the banks in the top 20 had assets of more than $100 billion. Rounding out the top 10 were Muncie, Indiana-based First Merchants (#5), Phoenix-based Western Alliance Bancorp (#6), Wheeling, West Virginia-based WesBanco (#7), Houston-based Prosperity Bancorp (#8 ). ). ), Kalispell, Montana-based Glacier Bancorp (#9) and New York-based DeWitt, Community Bank System.
"Relationships are important and middle market lending. Small and mid-cap banks have an exceptionally good ability to build personal relationships with their customers," says KBW's Cannon, who adds, "Commercial banks are a deposit-rich endeavor. Middle market lenders still have excellent access to low-cost deposits."
Consolidation played a role in 2019 as BB&T and SunTrust Bank closed on a $66 billion merger in December. From ranks #59 and #94, respectively, in 2018, the combined bank, now called Truist Financial, ranks #46 in our latest ranking.
The Big Four of U.S. banks—JPMorgan Chase, Bank of America, Citigroup and Wells Fargo—have combined assets of $9.1 trillion, or the total of the U.S. is more than half of Among these large banks, performance was strong with most firms on the Best Banks list driven by balance sheet strength, gains in -efficiency and high credit quality.
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JPMorgan moved back into the top half of our ranking, up nine places, to #42. The country's largest bank's financial metrics generally improved over the past 12 months and it significantly outperformed its larger banking competition. The Jamie Dimon-led firm scored best for its 18% return on tangible common equity, #13 overall, and for its strong capital ratios. In the fourth quarter, the consumer bank's 31% return on JPMorgan's equity led the firm.
"The US consumer remains in a strong position, and we see the benefits of that in our consumer businesses," Dimon said in the Jan. 14 earnings release. "The strong holiday season was reflected in our card sales volume and loan balances up 10% and 8%, respectively." JPMorgan's investment bank also posted a solid ROE of 14%, surpassing Wall Street peers such as Goldman Sachs and its 10% ROE.
Bank of America climbed 18 spots to #71. Efficiency, asset quality and a high risk-based capital ratio all put it in the top half of the rankings, while the firm's 15.3% return on average total common equity ranks #51. Citigroup also made gains, climbing four places to #76 and outperforming credit metrics such as risk-based capital, reserve coverage, and asset quality.
However, Wells Fargo' continued to fall in the ranking after a scandal of fake accounts in 2016 that cost the bank billions, led to the departure of two CEOs, and a crackdown by the Federal Reserve against the growth of assets. Wales dropped two places to finish 2019 at #87. In October, the San Francisco-based lender hired former Visa and Bank of New York Mellon chief Charles Scharf as its CEO after a lengthy search process, but its recent earnings highlight the challenges ahead. In the fourth quarter, Wells' profits fell more than 50% and revenue fell 5% to below $20 billion.
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"We came out of the financial crisis as the most valuable and respected bank in America. But as you know, we made some terrible mistakes and did not address our shortcomings effectively. "These circumstances have reduced financial performance," Scharf said on a Jan. 14 conference call with investors. The most respected and successful bank in America.”
Over the past 12 months, JPMorgan stock is up 34% and Citigroup is up 30%, both outpacing the S&P 500's 26% total return. Bank of America returned 20%, while Wells Fargo was lagging behind. Its shares have fallen over the past year, but the dividend payout meant the lender posted a total return of 1.7%.
While dividend increases and buybacks remain a catalyst for bank stocks, the Federal Reserve's decision to cut interest rates presents a problem.
Their already weak net interest margin is shrinking. JP Morgan stock took a beating in 2019, its NIM opened at 2.55% but closed at 2.38%. The bank ranked #94 on overall interest margin. Other potential obstacles in 2020 include new accounting rules from the Financial Accounting Standards Board on credit loss methodology.
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Rounding out the top 100 was Wyomissing, Pennsylvania-based Customers Bancorp, a commercial and consumer bank created in 2009 to clean up a failed bank and carry out an FDIC-assisted deal. Now with $11.7 Billion in Assets and Presence Along the I-95 Corridor for Washington, DC
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