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Sunday, July 24, 2011

Largest USA Banks: Financial Performance & Position Review (Charts) *QE June 30, 2011*

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Largest USA Banks Continue Recovering from the 2008 Financial System Crisis


Largest USA Banks: Financial Performance & Position Review *QE June 30, 2011*

Largest USA Banks Review Two ways to rank which banks are the Largest USA Banks are by market capitalization and total assets. Below is a review of the Largest USA Banks compared to their peers, the largest banks in the United States. These 7 banks are JPMorgan Chase, Wells Fargo, Citigroup, Bank of America, Goldman Sachs, U.S. Bancorp, and Morgan Stanley. Originally investment banks were a separate sector from traditional banks, but during the 2008 financial system crisis, the investment banks were chartered as traditional banks by the Federal Reserve to qualify for financial assistance such as TARP. The investment banking sector imploded, as evidenced by the Lehman Brothers bankruptcy in September 2008. Accordingly, both Goldman Sachs and Morgan Stanley, the remaining stand-alone investment banking giants, are included in the list.

Largest USA Banks Financial Measurement Five measurements of the 7 Largest USA Banks are reviewed. First is value, ranking by market capitalization. Second is financial position ranking by total assets and capital ratio. Third is financial performance ranking by quarterly net income and annualized return on assets. All but U.S. Bancorp are reviewed in detail on separate financial performance pages on this blog each quarter.

Largest USA Banks by Market Capitalization A measure of the size of a bank is the valuation of the bank by the equity market. The market valuation below is as of the market close on Friday, July 22, 2011 and provides a snapshot. All of the banks listed have reported their Q2 June 30, 2011 financial results, so their prior and expected financial performance and position has been priced into the publicly traded stock, along with any other financial system and economic uncertainties to-date. JPMorgan leads all banks with a market capitalization of $167.65 billion and is the 13th largest corporation traded on USA equity markets by market capitalization. Wells Fargo is 2nd at $154.12 billion (17th largest of all corporations), Citigroup is 3rd at $117.59 billion (21st largest), Bank of America is 4th at $102.65 billion (26th largest), Goldman Sachs is 5th at $70.15 billion (40th largest), U.S. Bancorp is 6th at $51.85 billion (59th largest), and Morgan Stanley is 7th at $36.92 billion (90th largest). By market capitalization JPMorgan and Wells Fargo are in the top tier, followed by Citigroup and Bank of America in the middle tier, and the remainder, Goldman Sachs, U.S. Bancorp, and Morgan Stanley are in the lower tier. The current average market capitalization of the 7 Largest USA Banks is $100.13 billion. The current aggregate market capitalization of the 7 Largest USA Banks is $700.93 billion.


Largest USA Banks by Total Assets The immense size of the financial position of the Largest USA Banks is measured by total assets. By this measure, two banks have over $2 trillion in total assets at the latest quarter: Bank of America is largest with $2.261 trillion and followed by JPMorgan Chase at $2.247 trillion. Citigroup is #3 with $1.956 trillion and Wells Fargo is #4 with $1.260 trillion. Next is #5 Goldman Sachs at $937 billion, #6 Morgan Stanley at $831 billion, and #7 U.S. Bancorp at $321 billion. The chart below illustrates 3 tiers of banks, the first, top tier is Bank of America, JPMorgan, and Citigroup. The second, middle tier is Wells Fargo, Goldman Sachs, and Morgan Stanley. The third, lower tier, is U.S. Bancorp. The current average assets of the 7 Largest USA Banks is $1.402 trillion. The current aggregate assets of the 7 Largest USA Banks is $9.813 trillion.


Largest USA Banks by Capital Ratio The strength of the financial position of the Largest USA Banks is measured by the basic capital ratio (total equity divided by total assets). By this measurement, two banks have a capital ratio greater than 10%, a banking benchmark, at the latest quarter: Wells Fargo leads with a 10.95% capital ratio followed by U.S. Bancorp at 10.39%. Next is Bank of America at 9.83%, followed by Citigroup 9.13%, JPMorgan Chase 8.14%, Goldman Sachs 7.73%, and Morgan Stanley 7.19%. The current average capital ratio for the 7 Largest USA Banks is 9.05%.


Largest USA Banks by Quarterly Net Income The current profitability of the financial performance of the Largest USA Banks is measured by quarterly net income. By this measure, for the latest quarter, JPMorgan Chase leads with a $5.43 billion quarterly net income for the QE 6-30-11. Second is Wells Fargo at $3.95 billion. Citigroup is #3 at $3.34 billion, U.S. Bancorp is #4 at $1.20 billion, Morgan Stanley is #5 at $1.19 billion, Goldman Sachs is #6 at $1.09 billion, and Bank of America is a dismal #7 with a loss of -$8.83 billion. The current average quarterly net income of the 7 Largest USA Banks is $1.05 billion, but Bank of America is significantly pulling down the average. The current aggregate quarterly net income for the 7 Largest USA Banks is $7.38 billion, but Bank of America is significantly pulling down the aggregate. [Note: On the chart, U.S. Bancorp quarterly net income (light blue) merged with Morgan Stanley quarterly net income (pink) in the QE 12-31-10 at the same approximate amounts. At QE 6-30-11, Goldman Sachs quarterly net income (purple) merged with these two at the same approximate amounts.] 


Largest USA Banks by Return on Assets Annual return on assets is the ultimate measurement of a traditional bank's financial performance. Banks use money (e.g. deposits) to invest (e.g. loans, investments, trading) to make money. However, investment banks may derive a significant portion of their income from their historical activities (e.g. mergers, acquisitions, public offerings, trading).  Return on assets reveals how effectively assets are being deployed to maximize profits and a 4-quarter moving average is shown on the chart for each bank. By this measurement, for the latest quarter, two banks have annual return on assets greater than 1.00%, a banking benchmark: U.S. Bancorp leads at 1.36%, followed by Wells Fargo at 1.16%. Next is #3 JPMorgan Chase at 0.94%, #4 Goldman Sachs 0.89%, #5 Citigroup 0.50%, #6 Morgan Stanley 0.38%, and finally #7 Bank of America at a negative -0.67%. The current average return on assets of the 7 Largest USA Banks is 0.68%, but Bank of America is significantly pulling down the average. [Note: Return on assets differ from bank reports or other sources. A more detailed method is utilized for this chart.]




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