If I ask you the question, “what is the best American bank?”, what would you say? Well, I may hear different answers from different people. Some might say JP Morgan Chase and some might say Wellsfargo. Or else some say all are alike – disastrous, especially if you haven’t come out of the financial mess they have caused. But my opinion differs with most of yours’. Of course, the question is subjective – necessary specifier to be added to this question would “from whose point of view”. Answer might differ if you judge from a customer’s point of view or from an investor’s point of view. Here I am talking from an investor’s point of view. My answer to this question is US Bancorp (USB), parent company of US Bank. Yes, it’s true if you look as an investor. As per the numbers (total assets), it’s the fifth largest bank in the US after the big four that everyone knows – JP Morgan Chase (JPM), Bank of America (BAC), Wellsfargo (WFC) and Citi Group(C). Why I say USB is the best among all? Let’s dig into the numbers.
To back my argument, I am showing you two samples of stock prices. In both cases US Bancrop stands in the first place. On Oct 9th 2007, Dow Jones industries index closed on all time high of $14164. Let’s see what were the stock prices of the top five banks on that day and calculate the change between then and now. The closing prices (adjusted closing prices) are
As of the last trading day – July 13th 2012- these stocks closed at
Note: Numbers enclosed in brackets show losses.
During this time Dow Jones’ gain is (-9.79%). Gains of bank stocks are as follows:
Only WFC and USB gained and other three banks lost and performed worse than Dow Jones. Between Wellsfargo and US Bancrop, the latter stood first. Let’s look at another criteria.
Let’s consider the last five years and see how these banks’ stocks performed. In the last five years the highest price of these stocks are as below.
JPM – $48.66 (Apr 28 2008)
WFC – $39.80 (Sep 19 2008)
BAC – $52.71 (Oct 1 2007)
C – $507.30 (Jul 16 2007)
USB – $37.99 (Sep 19 2008)
Let’s calculate the gain/loss of these stock prices from these highs.
Again US Bancorp stands first in the list with 13.92% loss and Wellsfargo is second with 14.7% loss.
Bottomline is, from the above numbers, US Bankcrop looks less risky than its counterparts. If you look at the growth side when times are good, US Bancrop might NOT stand at the top of the list. However, with less risk comes less reward/return. If you are a moderately risk-averse investor and want to invest in bank stocks, then US Bancrop looks to be a good option. As we all know, all financial institutions are riskier than other stocks. However, US Bancrop seems to be a better choice for those of you who are risk-averse but are into financial stocks.
PS: I just analyzed the stock prices changes here. Of course, you have to go through a lot more stats to decide before you invest in a stock. This post is NOT an exhaustive/thorough in that respect.