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U.S. Bank Tops the 5 Best-Managed Financial Institutions to Trade

Stocks in this article: AXP BK HSBC MTU NTRS SCHW STT USB WFC

NEW YORK (TheStreet) -- Recent financial strength ratings are in for midyear for the top 40 largest publicly traded worldwide banks with a U.S. presence that I rate. ("Largest" is by asset size.) It's no surprise that the best well-managed banks are found in the U.S. and Canada, given all of the uncertain economic and geopolitical risks overseas -- with none of the eurozone banks making the list.

Read More: 10 Stocks George Soros Is Buying

The table below shows the top rated financial institutions.

What makes these financial institutions superior to the rest? They had above-average capital, strong profitability, liquidity and stability, with well-managed loan portfolios.

My previous article, "Want to Invest in the Global Banking Sector? Think Canada," focused primarily on the strength of the two Canadian banks to make the list: Toronto-Dominion  (TD)   and Royal Bank of Canada  (RY) . Both of these banks showed potential stock price returns of 10% to 30% over the next 12 to 18 months. Though both are at or near 52-week high and all-time highs, earnings growth is expected to be at 8% or 9% for 2014 to 2015. That would justify the high 2 times to 2 1/2 times book value compared to the other banks on this list. These banks show continued reliability in delivering earnings by beating estimates over 75% of the time in the last three years.

Let's look at the remaining U.S. institutions to make the list. Those rated as "superior" or "excellent" are U.S. Bancorp (USB) , Charles Schwab (SCHW)   and Northern Trust (NTRS) . None of these institutions had significant exposure to European or overseas risks, and thus avoided the pitfalls that troubled many international banks.

Read More: Roche Buying InterMune for $8.3 Billion

Honorable mention goes out to banks rated as "very good," but which did not make the list: Wells Fargo (WFC) , Bank of New York Mellon (BK) , State Street (STT) , HSBC Holdings (HSBC) , Mitsubishi UFJ Financial (MTU) and non-traditional bank and credit card issuer American Express (AXP) . Look for a subsequent article for stock analysis of these well run banks.

Financial strength ratings and how well the banks are managed are only one aspect, though. Stock price analysis will point out if this is a good entry point to trade the bank.

Up next: analysis on when to buy and sell these stocks.

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