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Sunday, October 23, 2011

Largest USA Banks Report Improved Quarterly Results (Charts) *Financial Performance & Position Review*


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Largest USA Banks


Largest USA Banks Report Improved Quarterly Results

Largest USA Banks Profits Increase The 7 Largest USA Banks reported an aggregate quarterly net income of $21.38 billion for the QE 9-30-11, which is the highest in the 5 quarters reviewed. This is a an increase of +$14.00 billion and +190% from the prior quarter QE 6-30-11. The increase is attributable to Bank of America, swinging from a net loss of -$8.83 billion in QE 6-30-11 to a net income of +$6.23 billion in QE 9-30-11. As a result, the average return on assets increased to +0.76% for these banks, up from +0.65% in the prior quarter.

Largest USA Banks Assets Increase The 7 Largest USA Banks reported aggregate total assets of $9.82 trillion for the QE 9-30-11, which is the highest in the 5 quarters reviewed. This is an increase of +$10.82 billion and +0.11% from the prior quarter QE 6-30-11. JPMorgan Chase and Wells Fargo had the largest increase in assets. The average capital ratio (total equity divided by total assets) increased to 9.15% for these banks, up from 9.05% in the prior quarter.

Largest USA Banks Market Value Drops The 7 Largest USA Banks aggregate market capitalization dropped to $556.31 billion at October 21, 2011 from $700.31 billion at July 22, 2011. This is a decrease of -$144.62 billion and -20.63% in 3 months. While financial performance has improved in aggregate, the overall drop in USA equity markets pulled down these banks' value on USA and Global political, economic, and fiscal uncertainties.

Largest USA Banks Financial Performance Review

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 collapse of Bear Stearns in March 2008 and 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, October 21, 2011 and provides a snapshot. All of the banks listed have reported their Q3 September 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. Wells Fargo has surpassed JPMorgan as #1 since the prior quarter with a market capitalization of $138.91 billion. JPMorgan is now #2 at $130.31 billion. Citigroup continues 3rd at $88.41, Bank of America continues 4th at $65.46 billion, Goldman Sachs continues 5th at $51.64 billion, U.S. Bancorp continues 6th at $48.77 billion, and Morgan Stanley continues 7th at $32.81 billion. The current average market capitalization of the 7 Largest USA Banks is $79.47 billion. The current aggregate market capitalization of the 7 Largest USA Banks is $556.31 billion.


Largest USA Banks by Total Assets The immense size of the financial position of the Largest USA Banks is measured by total assets. JPMorgan Chase has surpassed Bank of America as #1 since the prior quarter with total assets of $2.289 trillion. Bank of America is now #2 at $2.220 trillion. Citigroup continues #3 with $1.936 trillion, and Wells Fargo continues #4 with $1.305 trillion. Goldman Sachs continues #5 at $949 billion, Morgan Stanley continues #6 at $794 billion, and U.S. Bancorp continues #7 at $330 billion. The current average assets of the 7 Largest USA Banks is $1.403 trillion. The current aggregate assets of the 7 Largest USA Banks is $9.824 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, 3 banks have a capital ratio greater than 10%, a banking benchmark, as of the latest quarter: Wells Fargo continues leading with a 10.67% capital ratio. Bank of America has barely surpassed U.S. Bancorp as #2 since the prior quarter with a capital ratio of 10.37%. U.S. Bancorp is now #3 at 10.36%. Citigroup continues #4 at  9.26%. JPMorgan Chase continues #5 at 7.96%. Morgan Stanley has risen to #6 from #7 at 7.78%. Goldman Sachs dropped from #6 to #7 at 7.64%. The current average capital ratio for the 7 Largest USA Banks is 9.15%.


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. Bank of America has surpassed JPMorgan Chase as #1 with a $6.23 billion quarterly net income. JPMorgan Chase is now #2 with a $4.26 billion quarterly net income for the QE 9-30-11. Wells Fargo continues third at $4.06 billion. Citigroup continues fourth at $3.78 billion. Morgan Stanley has surpassed U.S. Bancorp as fifth at $2.20 billion. U.S. Bancorp drops to sixth at $1.25 billion. Goldman Sachs drops to seventh with a -$339 million net loss. The current average quarterly net income of the 7 Largest USA Banks is $3.05 billion. The current aggregate quarterly net income for the 7 Largest USA Banks is $21.38 billion. 


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, 2 banks have annual return on assets greater than 1.00%, a banking benchmark. U.S. Bancorp continues leading at 1.43%, followed by Wells Fargo at 1.21%. JPMorgan Chase continues #3 at 0.91%. Goldman Sachs continues #4 at 0.63%, but now tied with #4 Morgan Stanley at 0.63%. Citigroup drops to #6 at 0.59%. Finally Bank of America continues at #7 with an "improved" -0.08%. The current average return on assets of the 7 Largest USA Banks is 0.76%.



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