Chart of the Week: Four Good (?) Banks

I wish there were something other than the banks to talk about for this week’s chart of the week, but until further notice, the banks are the story and it is inviting trouble to look past this fact for any period of time.

It was not too long ago that JPMorgan Chase (JPM), Bank of America (BAC), Wells Fargo (WFC) and US Bancorp (USB) were being held up as examples of four large relatively strong banks that were likely to emerge from the current financial crisis as the dominant large American banks.

At this stage of the game, it appears as if Bank of America is clearly in trouble, Wells Fargo is coming under increased scrutiny, and even stalwarts JPMorgan Chase and US Bancorp are seeing confidence and share prices eroding rapidly. Dividend cuts and insider purchases have done little to stem the tide of value destruction and comments by the Obama administration to the effect that they are strongly in favor of private ownership of the banks have provided no more than a temporary reprieve.

The chart below shows the performance of these ‘good’ banks in the post-Lehman period. During that period, JPMorgan Chase has been the top performer in the group, losing 2/3 of its value, while losses at Wells Fargo and US Bancorp are now over 75%. Bank of America is down over 90% during the same period.

Since I am on the subject, I thought I might point out that Global Finance has just compiled a list of the World’s 50 Safest Banks. The top U.S. bank on the list is Wells Fargo at #21. US Bancorp is #26, JPMorgan Chase is #47 and the only other U.S. bank on the list is The Bank of New York Mellon (BK), which comes in at #35.

[source: StockCharts]

US Bancorp Reeling

Not too long ago, Minneapolis-based US Bancorp (USB) was held up as an example as a ‘good bank’ with a strong loan portfolio. As recently as September, the stock was trading as high as 42 and the bank was widely hailed as one of the few national banks that was gaining ground on weaker competitors. On January 21, however, the bank announced a 65% drop in earnings as a result of a deteriorating loan portfolio and securities losses and the story began to unravel.

In reviewing the performance of bank stocks over the course of the past week, I was surprised to see that among large banks, US Bancorp has been the worst performer of all. The chart below shows the earnings-related 52-week low from January 21 was taken out decisively yesterday, following a week of heavy volume in which the stock lost a third of its value.

While investors are watching Citigroup (C) and Bank of America (BAC) closely for signs of weakness, perhaps US Bancorp and the regional banks are better indicators of what is going on in the banking landscape than their quasi-governmental big brothers.

[source: StockCharts]