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US Banks Operating with the Strongest Balance Sheets since 2007

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Strong balance sheet for future growth

Commercial banks (IYF) have improved their capital adequacy ratios, and they have managed lower defaults or non-performing assets, which were partly impacted by regulations, due to improved fundamental performance.

Bank of America (BAC) has seen a steady rise in its core banking business, which has led to a strengthening of deposits, loans, and quality assets. The bank reported deposits totaling ~$1.3 trillion in 2Q17, compared to ~$1.2 trillion in 2Q16.

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In 2Q17, Bank of America posted a healthy return on assets of 0.93%, 8.0% on common equity, and 11.2% on average tangible common equity. Its book value rose 5.0% to $24.88 per share, and its tangible book value per share appreciated 6.0% to $17.78 per share. Its total balance sheet stood at ~$2.3 trillion on June 30, 2017.

Wells Fargo’s (WFC) book value per share expanded to $36.53 in 2Q17 on the back of improved margins and deposits, compared with $35.38 in 2Q16 and $35.70 in 1Q17. The bank commanded a return on equity of ~12.0%, up from 11.7% in the previous year.

Wells Fargo’s Tier-1 equity ratio rose to 11.6%, reflecting improving balance sheet strength and lower nonperforming assets. The bank’s total balance sheet size stood at ~$1.9 trillion on June 30, 2017.

Leading with assets

JPMorgan Chase’s (JPM) book value per share also rose 5% to $66.05. Its Tier 1 capital ratio was 12.5%, reflecting an industry-wide trend of a strong balance sheet with lower-risk assets. The bank’s balance sheet size stood at ~$2.6 trillion, the highest among the major banks, on June 30, 2017. Its balance sheet size was ~$2.5 trillion on December 31, 2016.

Citigroup (C) has seen a strong run due to a focus on core banking as well as divestiture or selling of legacy assets. The bank’s balance sheet size stood at ~$1.9 trillion in 2Q17 compared to ~$1.8 trillion on December 31, 2016.

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