Difference in earning assets acts as a good indicator
The trend in earning assets in respect to bank size largely holds true across banks. However, within each class of bank size there are significant differences. This difference is one of the reasons why some banks are considered to be better than others.
Wells Fargo is the best of the big four banks in terms of earning assets
Nearly 90% of Wells Fargo’s (WFC) assets are earning assets. This makes it the bank with the largest percentage of earning assets among the big four banks. Earning assets of JP Morgan (JPM) and Bank of America (BAC) stand at 87.5% and 86.9%, respectively. This means Wells Fargo is the most efficient of the big four banks. This efficiency allows Wells Fargo to generate more revenue from every dollar of assets.
Wells Fargo also comes out on top in many other parameters. But, earning assets is one of the biggest reasons why Wells Fargo is generally considered to be the best-managed large bank in the US.
Few other mid-sized banks perform well in earning assets
US Bank (USB) has a good percentage of earning assets. Capital One (COF) and Sun Trust Bank (STI) also have a very good percentage of earning assets. These three banks account for 4.84% of the Financial Select Sector SPDR (XLF) portfolio. In fact, Sun Trust is the only US-based big bank to have a ratio higher than Wells Fargo.
Investment banks have a higher percentage of earning assets
Generally, investment banks and card-only banks have a higher percentage of earning assets. This is mainly due to lower branch requirements. A single branch is enough for a large area. 98.6% of Morgan Stanley’s (MS) assets are earning assets. Similarly, American Express and Discover Financial also have a high percentage of assets that earn revenues. On the other hand, Goldman Sachs has a much lower percentage of earning assets.