US Banks Operating with the Strongest Balance Sheets since 2007



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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