Academic journal article ABA Banking Journal

Banking's Top Performers 2011

Academic journal article ABA Banking Journal

Banking's Top Performers 2011

Article excerpt


The year 2010 was a transition year marked by continued challenges for the industry, albeit with glimmers of good news for some banking companies. On the negative side, more FDIC-insured institutions failed last year than in any other year since 1992. Changes to Regulation E significantly decreased deposit service charge income. Low interest rates--combined with low demand for credit--made it difficult to generate interest income.

On the positive side, these same low interest rates helped the majority of institutions to significantly lower their funding costs and prompted a wave of residential mortgage refinancing, helping mortgage servicing income to recover. Credit quality improved, allowing loan loss provisions to be reduced. Asset values rose, allowing institutions to realize gains (or at the very least, lower levels of losses) on the sales of securities, loans, and other assets on their books, while also contributing to an improvement in trust income that, in some cases, offset declines in fees elsewhere. And failed banks provided bargain acquisition opportunities for banks with capital to deploy.

Over the past year, the top-performing institutions were able to leverage one or more of the positive (though most likely temporary) trends listed above to generate above-average earnings. In Part One of the 19th annual ABA Banking Journal performance rankings, we will review the financial results and strategies of the nation's top-performing largest banks and thrifts. Part Two of our rankings, which will appear in June, will highlight the top-performing community banks and thrifts of 2010 (those with total assets below $3 billion).

Basis of the rankings

Our study ranks the performance of domestic depository institutions with assets over $3 billion as of Dec. 31, 2010. Two groups were included in our analysis: publicly held depository institutions (banks, thrifts, and bank or financial holding companies) and private or foreign-owned depositories (described in greater detail below). A total of 139 public banks, thrifts, and holding companies and 53 private institutions qualified under our selection criteria. They were ranked by return on average total equity (ROAE) for 2010. In instances where the reported ROAE was identical for two or more institutions, 2010 return on average total assets (ROAA) was used as a secondary ranking criterion.

Securities and Exchange Commission filings were the source for public company data, and regulatory filings were the data source for private and foreign-owned institutions.

Data for the 2010 analysis was provided by Highline Financial, LLC (instead of SNL Financial, LC, as in years past). Highline defines companies that are thinly traded as private institutions whereas SNL defined these institutions as public. Some institutions that appeared on our public rankings list last year will therefore now appear on our private list. As a result, we have re-run last year's rankings using Highline's data to provide a comparable year-over-year analysis.

The Top Performers

The first significant difference between 2010 and 2009 is that large nationwide banks have regained top performer status. Four institutions with total assets of over $100 billion--U.S. Bancorp (#13), Capital One Financial (#15), PNC Financial Services Group (#17), and JPMorgan Chase (#24)--appear on this year's list, compared to only one in 2009 (that single institution, Wells Fargo & Co. of San Francisco, Calif., ranked #26 this year). For the full rankings, please visit www.

The second (and probably more significant) difference is that, on many measures, the gap between the top performers and the rest narrowed slightly. The average ROAE among the top 25 was 12.82%, compared to an average ROAE among all analyzed institutions of -1.18%. That may not seem narrow, but the average ratios in 2009 ranged from 15. …

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