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Bank Stocks: A Year in Review

NEW YORK ( TheStreet) -- With the fiscal cliff, debt ceiling, sequester and government shutdown making the list of agenda topics that remained unresolved heading into 2013, I had my doubts that this would have been a good year for banks stocks. And when you consider the strain placed on the entire sector due to a chronically low interest rate environment, there were plenty of reasons to bet against last year's top performers.

With each of the "big four" banking giants posting gains of 30% or better, 2013 proved how resilient investors were in separating the constant noise that drowned the industry and instead placed their attention on the bank's actual balance sheets -- many of which showed drastic improvements each quarter.

For this reason (among others) I never believed that either JPMorgan Chase (JPM - Get Report) and Citigroup (C - Get Report), which are still working to overcome a few embarrassments, were in any real prolonged danger. And this is even with some disappointing results, like in the April quarter. It's true that interest rates took a toll on revenue, but management demonstrated throughout the course of the year that both banks possessed strong businesses, especially in investment banking.

In the case of JPMorgan, and even more so for Wells Fargo (WFC), their respective mortgage and retail banking businesses led the way. This is despite early sluggishness in loan demand. What was also impressive this year about Wells Fargo was the fact that management never made excuses. Instead, they've consistently raised the bar - adding pressure on their own ability to perform better. With year-to-date gains of 34%, which bested both Citigroup and JPMorgan, investors have responded.

However, with almost 36% gains, the big winner -- albeit by a slight margin -- was Bank of America (BAC). Given the degree to which BofA has been vilified over the past couple of years, including absorbing more blame than it deserved for the credit crisis, I don't believe anyone saw this one expected this level of outperformance. Nevertheless, I have always believed that these shares have outperformed the company's own results. Investors disagreed.

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