As I'm sure you know, the largest banks in the world were hit incredibly hard in the financial crisis of 2007-2008. Many banks saw their share prices drop rapidly by up to 1000% during the height of the crisis. Fortunately, the overall economic outlook as been looking much brighter lately, and some of the major banks are now experiencing large gains in the post-crisis era.
Bank of America (BAC) was one of the hardest hit banks in the financial crisis. The company's share price plummeted from around $45 in early 2008 to a low of $3.95 in January 2009, a loss of more than 90%. Since then, Bank of America has been slowly but steadily recovering. It is currently hovering in the $12-$13 range, still much lower than its pre-crisis highs, which suggests that investor sentiment is still pretty pessimistic. But with more than 57 million customers and 5,600 banking locations, Bank of America is still a major player and is not going to fade away anytime soon. While it may not look particularly attractive in the short run, it is likely to continue to recover and the current price is a bargain on the long-term scale.
Barclays (BCS) was also hit exceptionally hard during the crisis, plummeting from $50 in October 2007 to just over $5 in February 2009 practically in free fall. However, there was a silver lining in the crisis for Barclays. The company was able to acquire the investment banking and trading divisions of the bankrupt Lehman Brothers for a bargain of $81.35 bn. This acquisition made Barclays the world's fourth largest bank in terms of total assets. Regarding the company's more recent performance, Barclays has had an amazing explosion is sales over the past year; the mean estimate for sales for 2013 ($45.1 bn) is more than double the figure for 2012 ($22.4 bn). The long-term trend looks very promising, having had an increase of 27.09% without any major retracements over the past six months.
Citigroup (C) has had an unusual past four years. Following the crisis, Citi has been stuck in a sideways trend, mainly hovering in the $30-$40 range. The company has also had some struggles with its management, including an incident where CEO Vikram Pandit's pay package was rejected by shareholders. Recently, Citi has tried to attract investors with quarterly dividends, but has had limited success in doing so. However, in early December of 2012, Citi started showing the signs of recovery. Since December 3, 2012, Citi has had a 31.7% increase, from $34 to $45. Its gains over the past year have been slow but steady, quickly recovering from any retracements along the way. It looks as if Citi is finally breaking out of its sideways trend and is in the beginning stages of a full recovery.
Goldman Sachs (GS) has had a very successful past six months with an increase of nearly 29%. Just like all of the other major banks, Goldman took a big hit during the financial crisis, but Goldman has been recovering much faster than its competitors. While it's still pretty far off from its all-time peak of $235, it has quickly bounced back to $150 from its crisis low of $54.
One innovative way that Goldman has decided to boost profits is by relocating many employees to the new Salt Lake City office, which is now the company's second largest office. This is a part of a larger deal with Utah Governor Gary Herbert, who has promised Goldman up to $47.3 million in tax rebates over the next 20 years. While Goldman may not be doing "God's work" as CEO Lloyd Blankfein once joked, Goldman Sachs has certainly done very well post-crisis and looks like a very attractive investment in both short term and long term horizons.
JPMorgan (JPM) has had a very impressive performance in the post-crisis era. The company has already surpassed its 2008 high and has briefly broken past $50. The past year has been very good for JPM; the share price has gone from $31 to $49 since June 2012, an increase of over 58%. The company has successfully attracted investors via quarterly dividends of 30 cents. JPM made international headlines in May 2012 when a trader nicknamed the "London Whale" was blamed for a $2bn trading loss. However, this incident has not hindered JPM's success, as the company earned a record net income of $6.5bn in Q1 2013. Both technical and fundamental analyses are looking very bullish for JPM, making it a very promising investment.
Much like Citi, Morgan Stanley (MS) has been stuck in a sideways trajectory in the post-crisis era. Attempts to revitalize the company, such as becoming the world's largest wealth manager through the purchase of Smith Barney from Citi, and the highly publicized Facebook (FB) IPO, have only had limited success. Morgan Stanley is currently hovering at around $21, even lower than it was just six months after the crash in September 2008. The company's financials are not very promising either. The mean estimate for sales in the year ending December 13, is 8% lower than the previous year, and EPS has dropped from 2.31 to 2.09.
Since Jan. 2013, however, Morgan Stanley's outlook has been improving. Morgan Stanley has had a 14.11% gain YTD, compared with the S&P 500, which has had an 11.41% gain YTD. When looking at the long-term trend the S&P has significantly outperformed Morgan Stanley, but the company looks as if it could be starting to break out of its bearish trend, despite the weak financials.
In short, my stance on these major banks is as follows: Very bullish for both JPMorgan and Goldman Sachs; moderately bullish on Citi, Barclays and Bank of America, and skeptical about Morgan Stanley. While none of these banks is setting records for all-time highs, their current prices should be seen as a bargain, as the future is looking very bright for them.