Large U.S. Banks Reach Safety and Profitability Milestone
BRENTWOOD, TENN., August 12, 2014 – Loan growth, particularly in commercial real estate and commercial & industrial lending, helped drive the profitability of the 200 large banks in the 2014 Bank Performance Scorecard, published by Bank Director magazine. The ranking is based on 2013 calendar data. Not only are these banks more profitable–they’re safer. Asset quality improved and capitalization levels for Scorecard banks rose compared to 2012, with the exception of banks with between $5 billion and $50 billion in assets, which declined slightly.
The Bank Performance Scorecard is an annual ranking of the 200 largest banks traded on the NASDAQ OMX and NYSE exchanges, and is divided into three categories: Big banks, with more than $50 billion in assets; mid-sized banks, with between $5 billion and $50 billion in assets; and community banks, with between $1 billion and $5 billion in assets. Five key metrics are used to evaluate bank performance: core return on average equity (ROAE) and core return on average assets (ROAA), to measure profitability; the ratio of tangible common equity (TCE) to tangible assets, to measure capital strength; and credit quality, gauged through the ratio of nonperforming assets to total loans and other real estate owned, and the ratio of net charge-offs to average loans.
“It is clear from the results of this year’s Scorecard that the recovery of most large U.S. banks from the devastating effects of the financial crisis and the Great Recession is complete,” says Bank Director Editor Jack Milligan. “They still face a variety of challenges, including new regulations and a highly competitive lending market, but as a group large banks are much stronger today than they were five years ago.”
The complete rankings are available online in the digital edition of Bank Director magazine. The top performing banks this year are:
Capital One Financial Corp. (COF), headquartered in McLean, Virginia, tops the ranking of big banks. The company rated highly on profitability metrics, with a ROAA of 1.58 and a ROAE of 11.29. Unlike other top performers, Capital One shrank its balance sheet last year by selling a $7 billion credit card portfolio to Citigroup and allowing some of its credit card loans to run off as the company sought to reduce its risk profile. Capital One’s higher quality balance sheet resulted in approval from the Federal Reserve for a $1 billion share repurchase program and a hike in its quarterly dividend to $0.30 per share, from $0.05. Buffalo, New York-based M&T Bank Corp. repeated its second-place finish, and U.S. Bancorp of Minneapolis, which topped the profitability metrics with a 1.69 ROAA and 14.47 ROAE, ranked third. Ohio-based KeyCorp, of Cleveland, and Huntington Bancshares, of Columbus, Ohio, which topped the 2013 Scorecard, round out the top five.
First Financial Bankshares Inc. (FFIN), based in Abilene, Texas, ranks first among mid-sized banks. A strong performer that consistently ranks highly in the Scorecard, First Financial did especially well on profitability metrics, with a ROAA of 1.70 and a ROAE of 14.26, well above the industry median for banks of its size of 1.00 and 8.87, respectively. An active acquirer in recent years, the company’s strategy focuses on market share, pricing power and service quality. Miami Lakes, Florida-based BankUnited Inc., which topped the ranking last year for banks of its size, placed second.
Bank of the Ozarks Inc. (OZRK), of Little Rock, Arkansas, repeats its first-place finish in the community bank category. The bank grew loans at 24 percent in 2013, and its high net interest margin, at 5.63 percent, further fueled profitability. Bank of the Ozarks has also expanded its branch network beyond Arkansas to Texas, Georgia, North Carolina, Florida, Alabama and South Carolina.
The results of the Bank Performance Scorecard are available in print and online in the 3rd quarter 2014 issue of Bank Director, which also includes a bonus section on innovation in banking and the results of the 2014 Compensation Survey.
ABOUT BANK DIRECTOR
Since 1991, Bank Director has served as a leading information resource for the directors and officers of financial institutions. Through its quarterly Bank Director magazine, executive-level research, annual conferences, and its website, BankDirector.com, Bank Director reaches the leaders of the institutions that comprise America’s banking industry. Bank Director is headquartered in Brentwood, Tennessee.
Source: Bank Director magazine
Contact: Emily McCormick, director of research, (615) 777-8471, [email protected]