The Safest Banks in America for 2013

by | February 26, 2013 at 2:52 PM | Business, Economy, General


By Jon C. Ogg, 24/7 Wall St.

The U.S. banking sector is looking better in 2013 than it did in  2012, 2011 and so on. Balance sheets, credit metrics and underlying asset values  continue to recover. Still, the recession was not that long ago and economic  growth has hit serious headwinds. The public needs to be vigilant about  financial risk ahead of another round of major U.S. bank stress tests.  Regulators will soon decide which of the large American banks will be permitted  to return more capital to their shareholders via higher dividends and stock  buybacks. 24/7 Wall St. has recalibrated its list of the seven safest banks in  America for 2013 and beyond.

Several banks were very close to meeting all of our financial, historic and  transformative criteria, and they may be eligible for the list of safest banks  in 2014, or even after the stress tests and after decisions have been formalized  over returning capital to shareholders. Some of the data may seem investor  oriented, but the reality is that institutional depositors, creditors and  trading partners generally evaluate peers with many of the same metrics. The  global economic recovery has lost some steam at the same time that the stock  market has recovered. The public needs to know which of the larger banks are  safe, regardless whether the economy stabilizes or worsens again.

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This is the 24/7 Wall St. list of the safest banks in America for 2013  to deposit money into, ranked in order of safety, size by assets, and  reach.  Our rank is based on financial stability, size by assets, and by reach.


4. PNC Financial Services Group Inc. (NYSE:  PNC)
Market cap: $33.2 billion
Total assets: $305 billion

PNC Financial Services Group Inc. (NYSE:  PNC) is based in Pittsburgh and is the ninth largest bank in  America by assets, with expansion taking place in the Southeast. The acquisition  of RBC’s branches in the U.S. for almost $3.5 billion was nowhere close enough  to change its rank. This deal and a mortgage charge pressured  earnings. PNC has almost 2,900 branches in 17 states, and it also has an  internal CEO transition taking place. Net income was about $3 billion in  2012, and its return on equity was dragged down to 8.31% from 9.56% a year  earlier. Its Tier 1 common capital ratio was 9.6%, and it gave a Basel III Tier  1 common capital ratio projection of 7.3%. PNC pays a dividend of about 2.5% to  its common holders and is likely to get approval to raise its payout as it has  in 2012 and 2011. The bank’s return on assets is 0.97% and the return on  equity is 7.2%. PNC was strong enough financially to close its National City  acquisition at the end of 2008, when there was so much risk in the financial  markets. PNC’s stock trades at $62.90, versus a book value per share of  $67.05 and an analyst consensus price target of $68.33. The bank pays a 2.5%  dividend yield to its common holders, and it owns more than one-fifth of the  great asset management firm BlackRock Inc. (NYSE:  BLK), worth close to $8.5 billion.

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3. U.S. Bancorp (NYSE:  USB)
Market cap: $63.7 billion
Total assets: $353.9 billion

U.S. Bancorp (NYSE:  USB) often is overlooked as a money-center bank because it is a  super-regional located in Minneapolis.  It is the fifth largest commercial bank in the United States and caters to millions  of consumers. Its net income was more than $5.6 billion in 2012, with a Tier 1  common ratio of 9.0% and a Tier 1 common equity ratio of approximately 8.1%  under the proposed Basel III rules. The bank had a return on assets of 1.65% but  boasted a very high return on equity of 16.2%. U.S. Bancorp operates more than  3,000 branch locations and 5,000 ATMs, and its operations are spread out over 25  states. Warren Buffett’s Berkshire Hathaway Inc. (NYSE:  BRK-A) owns more than 61 million shares, now worth more than $2 billion.  U.S. Bancorp pays its common shareholders a 2.3% dividend yield, but its  finances are strong enough that we expect regulators to approve more dividend  hikes and continued share buybacks, as the company applies for them. The share  price of $33.88 compares to a book value of $18.31 per share, and analysts have  a consensus price target of $36.85. This big bank received an upgrade  from S&P in late August 2012 but was downgraded by Moody’s in December  2012.


2. J.P. Morgan Chase & Co. (NYSE:  JPM)
Market cap: $186 billion
Total assets: $2.4 trillion

Jamie Dimon is still the king of bankers, but the London Whale’s multibillion  trading loss, which was overlooked and minimized, helped to remove this  bank from being the safest bank in America. A growing shareholder call to split  Dimon’s chairman and CEO roles is another point of contention, but the reality  is that the bank’s finances are solid and it has the biggest fortress balance  sheet of all banks. Dimon even has said under testimony that the only risk to  the bank’s failure is a collision of the earth and moon. J.P. Morgan Chase &  Co. (NYSE:  JPM) made a profit of $21.3 billion in 2012, with a return on assets of  0.92% and a return on equity of 10.72%. Its represented Basel I Tier 1 common  equity ratio was 11.0%, and it projected that its Basel III Tier 1 common ratio was 8.7%. It is largely  expected that regulators will allow Jamie Dimon to raise the dividend and begin  more aggressive share buybacks. Its current common dividend yield for  shareholders is 2.5%. The share price of almost $49 compares to a book value per  share of $51.27 and a Wall St. consensus price target of $53.03. J.P.  Morgan has more than 5,600 branches around the nation and is still adding  branches each year.

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1. Wells Fargo & Co. (NYSE:  WFC)
Market cap: $188 billion
Total assets: $1.42 trillion

Wells Fargo & Co. (NYSE:  WFC) remains the undisputed safest bank in America. This bank makes its  money lending and acting as a bank more than through brokerage or investment banking and trading. Its net income in 2012 grew  19% over 2011 to $18.9 billion. The bank’s return on assets was 1.46%, with a  return on equity of 13.35%. Wells Fargo represented its Tier 1 common equity  ratio as 10.12% under Basel I, and its estimated Tier 1 common equity ratio was  8.18% under current Basel III capital proposals. Warren Buffett’s Berkshire  Hathaway Inc. (NYSE:  BRK-A) owns a stake worth more than $16 billion and has reportedly  acquired yet more shares. The safest banking giant in America is so safe  that it was allowed to raise its dividend ahead of other banks, and it now  offers a 2.87% dividend yield to the common holders. While shares trade at  almost $36, its book value per share is $27.64, and Wall St. analysts have  a consensus target price of $39.30. Wells Fargo has branches in almost every  state in America, with more than 9,000 stores and 12,000 ATMs.

To see the full list, visit 24/7 Wall St.


The opinions expressed are solely those of the author and do not necessarily reflect the views of Comcast.