U.S. Banking: It's Now The Big Four

The events of 2008 have completely reshaped the landscape of the U.S. commercial banking industry. At this point it looks as if four major banks will emerge as the dominant players: two relatively strong ones, and two that face a more challenging competitive environment.

Here the charts identify the players nicely. From the peak of October 2007, Wells Fargo (WFC) and JPMorgan Chase (JPM) have each fallen about 20%, less than one half of the drop in the financial sector ETF, (XLF). At the other end of the spectrum are Bank of America (BAC) and Citigroup (C), each of which has seen their stock drop at least 65% during this period. See the top chart (click to enlarge) for details.

Refocus to the period since the failure of Bear Stearns (bottom chart, click to enlarge) and the pattern is even more dramatic, with WFC and JPM each down a little more than 5% while BAC and C are down over 35%.

XLF hit a new low of 11.70 on Thursday and is trading at about 12.00 as I type this. If XLF and the large commercial banks are not able to scrape out a bottom, then this market will not be able to sustain any rally. Better yet, add SPDR Homebuliders (XHB) and the Consumer Dicretionary SPDR (XLY) to that list. A sustainable rally will require the participation of XLF, XHB, and XLY.

Comments

[searcher:]

WFC & JPM, good banks, short 'em anyway. Buy the bad boys and play the spread.

2008 Nov 18 02:03 PM

[Alex Hamilton!:]

There is trouble down the road for Bank of America, JPMorganChase & Citibank. Wells Fargo in fairly good shape... but you are forgetting about US Bancorp. So they have not purchased a 'falling knife' does not mean that they should be written off. Little do YOU know what is brewing ahead.......STAY TUNED!

2008 Nov 18 10:27 PM

[chinooking:]

where the hell is cox as the market tumbles with his no up-tick reg,

2008 Nov 21 02:57 PM