A Look At The Capital Strength Of The 20 Largest Banks In America

flexing muscles strong

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As Greece flirts with default, the focus in the U.S. is shifting to the capital strength of domestic banks with plenty to lose.DealBook’s Peter Eavis reports that five of the biggest U.S. banks, including JPMorgan Chase and Goldman Sachs, have more than $80 billion exposure to the riskiest European sovereigns — Greece, Ireland, Italy, Portugal and Spain. And the credit default swaps the banks bought to protect themselves against a credit event may never pay out.

But there’s more to worry about than Europe, based on a handy new note from Royal Bank of Canada that details the capital ratios of the 20 biggest US banks in the fourth quarter of 2011.

It shows a rise in the banks’ average Tier 1 capital ratio to 10.45 per cent, from 10.29 per cent in the third quarter, reflecting divestments and capital raising throughout the industry.

But under the incoming Basel III capital rules, which are set to drag down the average Tier 1 ratio to 9.00 per cent, some of the largest lenders, which tend to lag regional firms, will need to do more to meet the new 8.5 per cent requirement.

While non-performing assets and charge-offs generally declined in the fourth quarter, any turnaround could also force banks to raise more capital in stressed markets — and there are already plenty of jitters.

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title=”20. M&T Bank Corporation”
content=”Current Tier 1 capital ratio: 6.86% (down from 6.87% in Q3)
Under Basel III:
NA

With the lowest capital ratio of all the major banks studied by RBC, M&T suffered a rise in charge-offs in the fourth quarter (to 0.50 per cent of average loans, from 0.39 per cent in the quarter earlier) but reduced its non-performing assets to 2.70 per cent of all loans (from 2.90 per cent in Q3).

Source: RBC
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[slide
permalink=”19-regions-financial-corporation-2″
title=”19. Regions Financial Corporation”
content=”Current Tier 1 capital ratio: 8.50% (up from 8.16% in Q3)
Under Basel III:
7.70% (unchanged)

Regions Financial pushed down its non-performing assets to 7.96 per cent of total loans in the fourth quarter (from 8.19 per cent during the previous quarter), and also improved charge-offs to 2.16 per cent of average loans (from 2.51 per cent).

Source: RBC
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[slide
permalink=”18-us-bancorp-3″
title=”18. US Bancorp”
content=”Current Tier 1 capital ratio: 8.60% (up from 8.47% in Q3)
Under Basel III:
8.20% (unchanged)

A recovery in problem loans helped lift US Bancorp’s fourth-quarter profit, as non-performing assets fell to 3.27 per cent of total loans (from 3.56 per cent in the previous quarter) and charge-offs declined to 1.16 per cent of average loans (from 1.38 per cent).

The bank expects further credit improvements as the U.S. economy strengthens.

Source: RBC
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[slide
permalink=”17-suntrust-banks-4″
title=”17. SunTrust Banks”
content=”Current Tier 1 capital ratio: 9.25% (down from 9.31% in Q3)
Under Basel III:
NA (9.65% in Q3)

One of a host of banks setting aside less for doubtful loans after delivering a higher fourth-quarter profit, SunTrust shrank non-performing assets to 6.53 per cent of total loans (down from 6.90 per cent in the third quarter) and cut charge-offs to 1.55 per cent (from 1.67 per cent).

Source: RBC
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[slide
permalink=”16-fifth-third-bancorp-5″
title=”16. Fifth Third Bancorp”
content=”Current Tier 1 capital ratio: 9.34% (up from 9.33% in Q3)
Under Basel III:
9.70% (down from 9.80%)

The Midwestern regional bank is setting aside less cash for problem loans after charge-offs declined to 1.16 per cent in the fourth quarter (from 1.31 per cent), alongside non-performing assets at 5.29 per cent (from 5.29 per cent).

Source: RBC
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[slide
permalink=”15-wells-fargo-6″
title=”15. Wells Fargo”
content=”Current Tier 1 capital ratio: 9.46% (up from 9.34% in Q3)
Under Basel III:
7.49% (up from 7.41%)

Wells Fargo, the largest bank by market value, cut non-performing assets to 5.23 per cent in the fourth quarter (from 5.36 per cent in the quarter prior) and also reduced its charge-offs to 1.30 per cent (from 1.32 per cent).

The bank is considering returning capital to shareholders after delivering a record quarterly profit.

Source: RBC
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[slide
permalink=”14-zions-bancorporation-7″
title=”14. Zions Bancorporation”
content=”Current Tier 1 capital ratio: 9.53% (up from 9.53% in Q3)
Under Basel III:
7.90% (Q3 data unavailable)

Zions Bancorporation swung back to profit in the fourth quarter as non-performing assets declined to 3.93 per cent (from 4.56 per cent) and charge-offs fell to 1.05 per cent (from 1.13 per cent).

Source: RBC
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[slide
permalink=”13-capital-one-financial-corporation-8″
title=”13. Capital One Financial Corporation”
content=”Current Tier 1 capital ratio: 9.70% (down from 10.00% in Q3)
Under Basel III:
9.80% (down from 10.10%)

Capital One’s fourth-quarter profit tumbled more than 40 per cent as the bank put away extra funds to cover problem loans.At the same time, its charge-offs increased to 2.66 per cent (from 3.00 per cent) while non-performing loans were slightly lower at 2.88 per cent (from 3.00 in the third quarter).

Source: RBC
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[slide
permalink=”12-bbt-corporation-9″
title=”12. BB&T Corporation”
content=”Current Tier 1 capital ratio: 9.70% (down from 9.78% in Q3)
Under Basel III:
8.80% (unchanged)

One of the few banks to remain profitable during the crisis, the North Caroline bank impressed with its fourth-quarter profit. Non-performing assets also fell to 3.36 per cent (from 4.07 per cent), as charge-offs held steady around 1.47 per cent.

Source: RBC
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[slide
permalink=”11-bank-of-america-10″
title=”11. Bank of America”
content=”Current Tier 1 capital ratio: 9.86% (up from 8.65% in Q3)
Under Basel III:
7.25% to 7.50% (up from 6.39%)

The big jump in BofA’s capital ratios reflects a string of divestments aimed at shoring up the bank’s balance sheet, helping lift its fourth-quarter profit. At the same time, its non-performing assets fell to 5.45 per cent (from 5.59 per cent in the quarter prior) alongside charge-offs, which shrank to 1.71 per cent (from 2.12 per cent)

However, the bank has only covered 12 per cent of its exposure to risky European sovereigns with credit default swaps, which could come back to bite.

Source: RBC
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[slide
permalink=”10-jpmorgan-chase-11″
title=”10. JPMorgan Chase”
content=”Current Tier 1 capital ratio: 10.00% (up from 9.88% in Q3)
Under Basel III:
7.90% (up from 7.70%)

While JPMorgan reduced non-performing loans to 3.89 per cent in the fourth quarter (from 4.20 per cent the previous quarter), it suffered a rise in charge-offs (from 1.45 per cent to 1.65 per cent) and weaker profits in the same period.

Chief executive Jamie Dimon also says he is ‘increasingly worried’ about Europe’s debt crisis, which still threatens to smash US banks.”
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[slide
permalink=”9-huntington-bancshares-incorporated-12″
title=”9. Huntington Bancshares Incorporated”
content=”Current Tier 1 capital ratio: 10.00% (down from 10.17% in Q3)
Under Basel III: NA

Huntington Bancshares experienced a rise in non-performing assets, which reached 3.35 per cent in the fourth quarter (up from 3.13 per cent), while charge-offs fell to 0.84 per cent (from 0.92 per cent). After lifting its quarterly profit, the bank is setting aside less money for problem loans.

Source: RBC
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[slide
permalink=”8-pnc-financial-services-group-13″
title=”8. PNC Financial Services Group”
content=”Current Tier 1 capital ratio: 10.30% (down from 10.49% in Q3)
Under Basel III:
8.00% to 8.51%

Lower revenue dragged down PNC Financial’s fourth-quarter profit, but non-performing assets were less of a concern at 3.58 per cent (down from 3.76 per cent), as were charge-offs at 0.82 per cent (compared to 0.95 per cent during the previous quarter).

Source: RBC
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[slide
permalink=”7-comerica-incorporated-14″
title=”7. Comerica Incorporated”
content=”Current Tier 1 capital ratio: 10.31% (down from 10.57% in Q3)
Under Basel III:
NA

While Comerica delivered a flat fourth-quarter result due to the cost of a recent acquisition, the regional lender managed to reduce its charge-offs to 0.57 per cent (from 0.77 per cent) while it cut non-performing assets to 2.66 per cent (from 2.95 per cent).

Source: RBC
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[slide
permalink=”6-keycorp-15″
title=”6. KeyCorp”
content=”Current Tier 1 capital ratio: 11.28% (unchanged)
Under Basel III:
NA

The small mid-west bank’s fourth-quarter profit beat estimates as charge-offs fell to 0.86 per cent (from 0.90 per cent). However, KeyCorp’s non-performing assets climbed to 2.80 per cent (from 2.12 per cent) over the same period.

Source: RBC
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[slide
permalink=”5-citigroup-16″
title=”5. Citigroup”
content=”Current Tier 1 capital ratio: 11.80% (up from 11.71% in Q3)
Under Basel III:
NA

While Citigroup boats the best capital ratio of any of the big four banks, its non-performing loans were at 8.05 per cent in the fourth quarter (down from 8.42 per cent) as charge-offs declined to 2.54 per cent (from 2.77 per cent).

Citigroup says it is well-protected from a credit event in Europe, with 47 per cent of its exposure to the continent’s troubled sovereigns covered by credit default swaps, but there’s no guarantee the stressed insurers will be able to pay out.

The bank also posted a weaker fourth-quarter profit as its investment banking and trading operations faltered.

Source: RBC
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[slide
permalink=”4-popular-inc-17″
title=”4. Popular Inc”
content=”Current Tier 1 capital ratio: 12.10% (up from 12.02% in Q3)
Under Basel III:
NA

Improved credit quality helped return Popular to profit in the fourth quarter, as charge-offs fell (to 2.42 per cent from 2.58 per cent) and non-performing loans were cut (to 11.40 per cent from 13.72 per cent).

Source: RBC
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[slide
permalink=”3-northern-trust-corporation-18″
title=”3. Northern Trust Corporation”
content=”Current Tier 1 capital ratio: 12.10% (up from 11.76% in Q3)
Under Basel III:
12.30% (up from 11.80%)

Northern Trust, which is implementing a major cost-cutting program as profits slide, experienced a reduction in non-performing assets (to 1.08 per cent, from 1.18 per cent) and charge-offs (at 0.25 per cent, down from 0.40 per cent) during the fourth quarter.

Source: RBC
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[slide
permalink=”2-bank-of-new-york-mellon-corporation-19″
title=”2. Bank of New York Mellon Corporation”
content=”Current Tier 1 capital ratio: 13.40% (up from 12.48% in Q3)
Under Basel III: 7.10% (up from 6.60%)

Non-performing assets have risen to 1.36 per cent of total loans in the fourth quarter (from 1.40 per cent in Q3) alongside charge-offs, which are down to 0.22 per cent (from 0.15 per cent), as fourth-quarter earnings missed expectations.

Source: RBC
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[slide
permalink=”1-state-street-corporation-20″
title=”1. State Street Corporation”
content=”Current Tier 1 capital ratio: 16.90% (up from 15.96% in Q3)
Under Basel III: 14.50% (up from 10.10%)

At State Street, with by far the highest Tier 1 ratio of any US bank, non-performing assets have fallen to 3.06 per cent in the fourth quarter (from 2.87 per cent) and net charge-offs have disappeared (from 1.04 per cent during Q3).

The firm, which missed profit expectations in the fourth quarter, has embarked on a major cost-cutting program — including slashing staff.

Source: RBC
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[slide
permalink=”if-europe-collapses-it-wont-just-take-down-banks-21″
title=”If Europe collapses, it won’t just take down banks”
content=”Here are 15 Companies That Will Get Smashed If Europe Goes Bust >


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