While Bank of America Corp. (NYSE: BAC) was the best performing of the 30 Dow Jones Industrial Average stocks in 2012, it and the money-center banking giant Citigroup Inc. (NYSE: C) actually do not qualify to be in the safest banks in America, even though the reality is that these banks are almost certain to survive another recession. The Federal Reserve deems them to still be problem banks, and they have so far not been freed up to raise their dividends or to increase share buybacks. That may change ahead, and the reality is that these banks are believed to be strong enough to weather most negative scenarios under the impending stress tests.
Based on the analysis, we anticipate that future lists of the safest banks in America may include 10 or even 12 banks, rather than seven, because many banks only missed one criteria yet exceeded other hurdles handily. We still are not evaluating the community or single-region banks due to size or single geography risks. That being said, many of those community banks have better ratios than any of the larger safest banks in America.
This is the 24/7 Wall St. list of the seven safest banks in America for 2013 to deposit money into, ranked in order of safety, size by assets, and reach. Our rank is based on financial stability, size by assets, and by reach.
BOK Financial Corp. (NASDAQ: BOKF)
Market cap: $4 billion
Total assets: $28.1 billion
BOK Financial Corp. (NASDAQ: BOKF) is small compared to the major banks, but it also had one of the few credit rating upgrades (from Fitch, to A from A-) in 2012. Its net income of $351 million in 2012 may sound small compared to the rest of these banking giants, but it is classified as an overcapitalized bank. The return on assets was 1.32% and the return on equity was 12.23%. Its Tier 1 capital ratio of 12.59% is also high on the list of safest banks, and its Tier 1 common equity ratio under a fully phased in Basel III framework was approximately 12.15%.The bank holding company is based in Tulsa, Okla., and its common branch names in other states are Bank of Albuquerque, Bank of Arizona, Bank of Arkansas, Bank of Kansas City, Bank of Oklahoma, Bank of Texas and Colorado State Bank and Trust.
M&T Bank Corp. (NYSE: MTB)
Market cap: $13.4 billion
Total assets: $83 billion
M&T Bank Corp. (NYSE: MTB) is based in Buffalo, N.Y., and dates back to 1856. M&T was ranked as number four on our list of America's safest banks in 2012, but it has dropped to number six due to its pending $3.7 billion acquisition of Hudson City Bancorp Inc. (NASDAQ: HCBK), versus its current market cap of $13.4 billion. The bank can absorb this acquisition, as it has a long history of acquisitions, but Hudson City has lost some of its former strength and we have not yet seen what the combined finances will look like after the approval vote in April of 2013.
The bank is in the top 20 largest banks, with more than 700 branches in eight states in the Northeast and eastern seaboard. M&T pays out a dividend of about 2.7% to its common stockholders, and its dividend has been static at $0.70 per quarter going back to 2007. The stock is trading at almost $105, and Wall St. analysts have a consensus price target of $107.64. Its book value per share has not been updated but was $71.58 per share as of the third quarter of 2012.
KeyCorp (NYSE: KEY)
Market cap: $8.9 billion
Total assets: $89.2 billion
KeyCorp (NYSE: KEY) earned $827 million in 2012. Its return on assets was 0.96% and its return on equity was 8.5%. The bank represented its Tier 1 common equity ratio as 11.16%. It operates through almost 1,100 retail branches in 14 states in the Rocky Mountains, Northwest, Great Lakes and Northeast. It remains impressive that KeyCorp is on the list of safest banks when you consider that it is headquartered in Cleveland, where many troubled loans arose. The bank pays a 2.1% yield to its common shareholders.
PNC Financial Services Group Inc. (NYSE: PNC)
Market cap: $33.2 billion
Total assets: $305 billion
PNC Financial Services Group Inc. (NYSE: PNC) is based in Pittsburgh and is the ninth largest bank in America by assets, with expansion taking place in the Southeast. The acquisition of RBC's branches in the U.S. for almost $3.5 billion was nowhere close enough to change its rank. This deal and a mortgage charge pressured earnings. PNC has almost 2,900 branches in 17 states, and it also has an internal CEO transition taking place. Net income was about $3 billion in 2012, and its return on equity was dragged down to 8.31% from 9.56% a year earlier. Its Tier 1 common capital ratio was 9.6%, and it gave a Basel III Tier 1 common capital ratio projection of 7.3%. PNC pays a dividend of about 2.5% to its common holders and is likely to get approval to raise its payout as it has in 2012 and 2011.
The bank pays a 2.5% dividend yield to its common holders, and it owns more than one-fifth of the great asset management firm BlackRock Inc. (NYSE: BLK), worth close to $8.5 billion.
U.S. Bancorp (NYSE: USB)
Market cap: $63.7 billion
Total assets: $353.9 billion
U.S. Bancorp (NYSE: USB) often is overlooked as a money-center bank because it is a super-regional located in Minneapolis. It is the fifth largest commercial bank in the United States and caters to millions of consumers. Its net income was more than $5.6 billion in 2012, with a Tier 1 common ratio of 9.0% and a Tier 1 common equity ratio of approximately 8.1% under the proposed Basel III rules. The bank had a return on assets of 1.65% but boasted a very high return on equity of 16.2%. U.S. Bancorp operates more than 3,000 branch locations and 5,000 ATMs, and its operations are spread out over 25 states. Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK-A) owns more than 61 million shares, now worth more than $2 billion. U.S. Bancorp pays its common shareholders a 2.3% dividend yield, but its finances are strong enough that we expect regulators to approve more dividend hikes and continued share buybacks, as the company applies for them
J.P. Morgan Chase & Co. (NYSE: JPM)
Market cap: $186 billion
Total assets: $2.4 trillion
Jamie Dimon is still the king of bankers, but the London Whale's multibillion trading loss, which was overlooked and minimized, helped to remove this bank from being the safest bank in America. A growing shareholder call to split Dimon's chairman and CEO roles is another point of contention, but the reality is that the bank's finances are solid and it has the biggest fortress balance sheet of all banks. Dimon even has said under testimony that the only risk to the bank's failure is a collision of the earth and moon. J.P. Morgan Chase & Co. (NYSE: JPM) made a profit of $21.3 billion in 2012, with a return on assets of 0.92% and a return on equity of 10.72%. Its represented Basel I Tier 1 common equity ratio was 11.0%, and it projected that its Basel III Tier 1 common ratio was 8.7%.J.P. Morgan has more than 5,600 branches around the nation and is still adding branches each year.
Wells Fargo & Co. (NYSE: WFC)
Market cap: $188 billion
Total assets: $1.42 trillion
Wells Fargo & Co. (NYSE: WFC) remains the undisputed safest bank in America. This bank makes its money lending and acting as a bank more than through brokerage or investment banking and trading. Its net income in 2012 grew 19% over 2011 to $18.9 billion. The bank's return on assets was 1.46%, with a return on equity of 13.35%. Wells Fargo represented its Tier 1 common equity ratio as 10.12% under Basel I, and its estimated Tier 1 common equity ratio was 8.18% under current Basel III capital proposals. Warren Buffett's Berkshire Hathaway Inc. (NYSE: BRK-A) owns a stake worth more than $16 billion and has reportedly acquired yet more shares. The safest banking giant in America is so safe that it was allowed to raise its dividend ahead of other banks, and it now offers a 2.87% dividend yield to the common holders. While shares trade at almost $36, its book value per share is $27.64, and Wall St. analysts have a consensus target price of $39.30. Wells Fargo has branches in almost every state in America, with more than 9,000 stores and 12,000 ATMs.
Full Story by Jon C. Ogg
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.