NEW YORK (
has identified 10 large banks with stubbornly high problem assets, some of which could provide outsized gains for investors over the next year.
Beginning with a list of 93 publicly traded bank and thrift holding companies -- excluding any traded on the Pink Sheets -- with total assets exceeding $5 billion as of June 30, we have isolated the 10 companies with the highest percentage of nonperforming assets as of June 30. SNL Financial supplied the data, and we used the nonperforming assets ratios derived by from Securities and Exchange Commission filings.
SNL defines nonperforming assets (NPA) as nonperforming loans (as reported by the holding companies) plus renegotiated loans and leases, plus repossessed real estate.
Of course, the NPA ratio only factors-in problem assets that are on the banks' balance sheets. For several of the largest mortgage lenders, most of the credit risk is off the balance sheet.
Bank of America
(BAC - Get Report)
, for example, had $ $384.8 billion in one-to-four family residential mortgage loans serviced for others (excluding home equity lines) as of June 30. Out of this total $148.8 billion, or 39%, were past due 90 days or more, according to the company's regulatory filing with the
. Another $22.6 billion, or 6%, of the loans serviced for others, were past due 30 to 89 days.
Bank of America also reported that $131 billion, or 34%, of the one-to-four family mortgage loans (again excluding home equity lines) serviced for others, were in some phase of the foreclosure process, as of June 30.
So the nation's largest bank holding company doesn't even know how much risk it is facing from institutional investors' mortgage putback demands.
The following 10 bank and thrift holding companies aren't facing the existential threat of unknown risk from ever-mounting mortgage repurchase demands, but their earnings have suffered as their on-balance-sheet nonperforming assets have remained stubbornly high.
That being said, there's plenty of upside for the shares as indicated by consensus price targets, and only two of the names have any analysts recommending selling the shares. Half of the names have five or more analysts rating the shares a buy.
Here are the
10 bank and thrift holding companies
with the highest NPA ratios per SNL Financial, as of June 30, counting up to the one with the weakest asset quality: