Generally speaking, what sets the best banks apart, according to RBC Capital Markets, is "an unwavering focus on credit quality, maintenance of low operating expenses, i.e., efficiency ratio, and ability to grow revenues consistently through a cycle." RBC Capital Markets also emphasizes deployment of capital, with Wells Fargo's year-end 2008 acquisition of Wachovia as a prime example, as well as the return of capital to investors through dividends and share buybacks.
Capital deployment will be the big story for bank stock investors next week, with the Federal Reserve set to announce on March 26 the results of its annual review of large banks' plans to raise dividends, repurchase shares and/or make acquisitions from the second quarter of 2014 through the first quarter of 2015.
Please see these articles for more on bank stress tests and capital returns:
Discover, Fifth Third Are Well-Positioned for Higher Payouts After Stress Tests
Banks' Excess Capital Is 'Absolutely a Reality'
A 'Compelling' Case for JPMorgan's Stock
Citigroup, Stress Tests and Shareholder Gravy
Why You Should Celebrate Bank Stress Tests