(Updated with return on asset ratios of Bank of America and Citigroup for further comparison and stock price action.).
NEW YORK (TheStreet) -- Bank stocks have been rallying in the early weeks of 2012, but the headwinds for the sector have not exactly disappeared.
With the Fed pledging to keep short-term rates near zero until 2014, the much anticipated foreclosure settlement to see roadblocks, the prospect of a disorderly greek default looming larger and more anti- Wall Street rhetoric from Washington than ever, the environment remains challenging for bank stocks.
Bank stocks were seeing tepid action on Friday, after the government reported a fourth-quarter GDP growth of 2.8%, below the estimate of 3%.Investors might be better off focusing on the more highly profitable banks that bring home the bacon, because they are better placed to navigate the tough environment. TheStreet screened 10 banks that rank the highest on "returns on average assets"(ROA) in 2011. ROA is a measure of how profitable a bank is relative to its total assets All actively traded U.S. banks and thrifts -- excluding those traded on the Pink Sheets -- with average daily trading volume of over 50,000 shares were considered. Only those that reported fourth quarter results have been considered, as full-year numbers are being considered. All data is from SNL. 10.Wells Fargo
Wells Fargo (WFC) has received much analyst love after it reported a stellar fourth quarter. The San Francisco-based bank reported a net income of $4.1 billion or 73 cents per share, compared to a year-ago net income of $3.41 billion or $0.61 per share and a third quarter net income of $4.06 billion or $0.72 per share. Revenue came in at $20.61 billion, down from $21.49 billion a year earlier. In the third quarter, the bank reported revenue of $19.63 billion. Analysts applauded the solid growth in mortgage banking income; mortgage origination revenues jumped 59% over the third quarter versus a 12% decline at JPMorgan Chase (JPM). It also managed a positive gain in net interest margins-a measure of how much banks earn on their loans versus what it costs them to borrow- when most analysts expected it to fall. 14 analysts raised their price target for the bank shares immediately following the results, even though the bank continues to trade at a premium over its peers. Wells delivered a return on asset of 1.28% in 2011, up from 1.03% in 2010, while JPMorgan, the other high-quality name in the banking space, managed only about 0.86%. That is still better than Citigroup (C), which earned a return on asset of 0.58% and Bank of America's (BAC) dismal 0.06%. 23 analysts rate the stock a buy, 9 a hold and 1 analyst has a sell rating on the stock.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV