10 Most Profitable Bank Stocks (Update 1)

(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.

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