NEW YORK (TheStreet) -- The Dubai debacle has prompted investors, once again, to consider the state of the credit crisis and global banks.
Dubai's state-controlled holding company last week sought a standstill agreement with creditors and an extension of loan maturities until at least May 30, the latest credit bubble to burst more than a year after Lehman Brothers died and AIG (AIG) was put on life support.
Still, three of the four biggest U.S. banks -- Bank of America (BAC), JPMorgan Chase (JPM), Citigroup (C) and Wells Fargo (WFC) -- are excellent choices for long-term investors. The following is a breakdown of each of the four banks, and their prospects as investments.
Bank of AmericaNot only is Bank of America going through a humiliating search for a replacement for Chief Executive Officer Ken Lewis, one of the candidates, internal senior executive Brian Moynihan, laid an egg during the Congressional Oversight Committee hearing on Nov. 17. Saying he didn't know for sure why former general counsel Timothy Mayopoulos was fired last December, Moynihan put forth that he believed it was part of the company's "downsizing." Members of the committee later said the testimony was hard to believe, since the dismissal came after Mayopoulos said Bank of America couldn't justify backing out of its deal to acquire Merrill Lynch, and Moynihan was the initial replacement as general counsel and reported directly to Lewis. The CEO search, along with the heightened scrutiny that goes along with a $45 billion government stake in the company, has put a drag on Bank of America's shares, which have fallen about 17% since mid-October. But there are bright spots for investors willing to hold the stock for several years. For one, the price-to-tangible-book ratio is 1.4, down from 2.8 at the end of 2007 and 3.5 in both 2006 and 2005, according to SNL Financial. During periods of "normal" economic growth, the four largest banks have tended to trade for at least two times tangible book value, but often much higher. Over the next several years, the Merrill Lynch acquisition should pay off, with the unit boosting revenue in Bank of America's Global Banking, Markets and Wealth & Investment Management segments.
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