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) -- Wednesday's stock market action showed no little trepidation among investors following the reelection victory of President Obama, and the nation's largest banks bore the brunt of the pain.

Investors are rightly concerned that the President will be playing a game of brinksmanship has he negotiates a resolution to the "fiscal cliff" with Republicans, who maintained their control over the House of Representatives, while the Democratic Party retained control over the Senate.

The fiscal cliff describes the possible end to the federal income tax cuts enacted while George W. Bush was president and extended as part of President Obama's August 2010 deal with Congress to raise the federal debt ceiling. Along with a reversal of the tax cuts -- including the beloved

15% maximum

federal income tax rate on most investment dividend income -- a concurrent cut in federal spending would likely cause the U.S. economy to slip back into recession, according to many economists.

The president has made it clear that even if he approves an extension to most of the tax cuts, he wants higher-income investors to pay income taxes on dividend income at their ordinary rates, and also wants to see an increase in capital gains tax rates for higher-income investors.

Investors also cringe at the mountain of change for U.S. companies and for the nation's healthcare system being brought about by the Patient Protection and Affordable Care Act -- also known as Obamacare -- which Mitt Romney had promised to attempt to roll back, in whole or in part, along with the Dodd-Frank Wall Street Reform and Consumer Protection Act, the two massive pieces of legislation that were highpoints for President Obama's first term.

The broad indexes all saw declined over 2% on Wednesday, but the banks really took it on the chin, with the

KBW Bank Index


dropping 4.5% to close at 48.80, with all 24 index components showing declines of at least 2%.

A signature element of Dodd-Frank was the creation of the Consumer Financial Protection Bureau. While not having the opportunity to serve as the new financial industry regulator's director after serving as a special assistant to the president in order to implement the bureau, Elizabeth Warren will have plenty of opportunities to take further shots against the nation's biggest banks, since she is the new U.S. Senator-elect from Massachusetts, having unseated Senator Scott Brown.

Of course, with the banking industry continuing to earn money and build capital as the economy continues its slow recovery and loan quality improves, investors may be looking at a pull-back opportunity, following a very strong showing this year for most large-cap bank stocks.

The "big four" U.S. banks had a very rough Wednesday.

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The financial loser was

Bank of America

(BAC) - Get Bank of America Corp Report

, with shares sliding over 7% to close at $9.23. Bank of America's shares have now returned 67% year-to-date, following an epic 58% decline during 2011. The shares may appear cheap, trading at just 0.7 times their reported Sept. 30 tangible book value of $13.48, but they are the most expensive among the big four to forward earnings. BAC trades for 9.5 times the consensus 2013 earnings estimate of 97 cents a share, among analysts polled by Thomson Reuters. That's a rather costly forward P/E in the current environment for the nation's largest bank stocks, especially when considering Bank of America's uneven earnings performance and legacy mortgage putback risk.

Bank of America currently pays a nominal quarterly dividend of a penny a share. Looking past the fiscal cliff negotiations, investors are hoping for Bank of America to begin returning more significant capital to investors during 2013 following the next round of

Federal Reserve

stress tests.

Deutsche Bank analyst Matt O'Connor on Tuesday estimated that the company would return a total of $2.981 billion to common shareholders next year, through $1.481 billion in dividends, plus $1.500 billion in share buybacks. The analyst expects Bank of America's 2013 dividend yield on common shares to be 1.3%.

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Shares of


(C) - Get Citigroup Inc. Report

dropped over 6% to close at $36.05. The shares have now returned 37% year-to-date, following a 44% decline last year.

Citi's shares trade for 0.7 times their reported Sept. 30 tangible book value of $52.70, and for eight times the consensus 2013 EPS estimate of $4.64.

Following former Citigroup CEO Vikram Pandit's recent ouster, investors are looking for new CEO Michael Corbat to speed-up Pandit's long-term "good bank/bad bank" strategy of placing noncore assets into Citi Holdings and winding them down, in order to boost regulatory capital ratios and enable a significant boost in the company's return of capital to investors, through share buybacks and an increase in the dividend on common shares, which is currently just a penny per quarter.

Following the next round of stress tests, O'Connor expects Citigroup to return a total of $2.774 billion in capital to investors during 2013, through $1.199 billion in dividends, and $1.575 billion in common share repurchases. The analyst expects Citi's shares to have a dividend yield of 1.1% for 2013.

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Shares of

JPMorgan Chase

(JPM) - Get JPMorgan Chase & Co. (JPM) Report

declined 6% on Wednesday to close at $40.46. The shares have now returned 25% year-to-date, following a 20% decline during 2011.

The shares trade for 1.1 times tangible book value, according to Thomson Reuters Bank Insight, and for eight times the consensus 2013 EPS estimate of $5.32.

JPMorgan's shares already have an attractive dividend yield of 2.97%, based on a quarterly payout of 30 cents, but the company's $15 billion common stock buyback plan was suspended in May, after CEO James Dimon announced that the company was facing major losses over the hedging activity of its Chief Investment Office. The company still showed a second-quarter profit of $5.0 billion, or $1.21 a share, despite $4.4 billion in hedge trading losses, followed by record earnings of $5.7 billion, or $1.40 a share during the third quarter.

Despite the second-quarter trading turmoil, JP Morgan Chase has been a good earnings performer, with operating returns on average assets (ROA) improving steadily from 0.76% to 1.01% over the past five quarters, according to Thomson Reuters Bank Insight.

Dimon has indicated that he expects JPMorgan to resume share buybacks during 2013. O'Connor expects JPMorgan's dividend payout to increase to $5.567 billion in 2013 from $4.656 billion in 2012, with the stock's "implied yield" climbing to 3.3%. The analyst said that "we believe expectations are too high for JPM in particular," for the total return of capital during 2013, and he doesn't expect JPMorgan to resume common share buybacks in next year.

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Wells Fargo

(WFC) - Get Wells Fargo & Company Report

saw its shares decline by 3.5% Wednesday, closing at $32.91. The shares have now returned 22% year-to-date, following a 10% decline during 2011.

The shares trade for 1.5 times tangible book value, and for nine times the consensus 2013 EPS estimate of $3.63.

Wells Fargo's earnings have been the strongest and most consistent among the big four, with operating ROA improving from 1.27% to 1.46% over the past five quarters, according to Thomson Reuters.

Based on a quarterly payout of 22 cents, Wells Fargo's shares have a dividend yield of 2.67%.

O'Connor expects Wells Fargo to return a total of $11.165 billion in capital to investors during 2013, with dividends of $6.297 billion increasing from $4.707 in 2012, and $4.868 million in share buybacks, increasing from $3.481 billion. The analyst expects Wells Fargo's common shares to have a dividend yield of 3.6%.

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Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.