Bank Stocks Among the Best Performers: 2012 in Review

by Gene Kirsch, Senior Banking Analyst | November 28, 2012

As we approach the last investing days of 2012, it’s a great time to look back, assess the banking sector and gain some perspective for investing in the coming year. After what has seemed a rather chaotic financial environment, it’s almost hard to fathom, but it’s true—according to Standard & Poor’s 500 Index (SPX), Financials have been the best performing sector, with a year-to-date return of 22.2 percent as of November 23. Even the broader Morningstar sector comparison has Financial Services (including global banks and insurers) as the second-best performing industry with a year-to-date return of 18.31 percent through November 23. And Morningstar’s 150 industry-segment evaluation shows U.S. banks ranked 22nd.

Then, taking a look at Morningstar’s eight banking regions, U.S. banks were the second-best performers at 22.02 percent return, behind only Australia at 32.02 percent. While the worst performing regions for banks were Latin America with a negative 8.57 percent return and Canada up only 11.33 percent year-to-date, Weiss found banks in those regions financially strong (Brazil – ranked 8th; Mexico – ranked 5th; Canada – ranked 15th). Simply put, in addition to financial strength, there are many factors that can affect stock performance.

Here are some U.S. banks that performed the best in 2012: 

Name Ticker Assets
(in $Bil)
YTD
Return %
Weiss Financial Strength Rating1
Taylor Capital Group
TAYC
5.12
80.25
      C
Bank of America
BAC
1,659.30
78.60
      C+
Synovus Financial Corp.
SNV
25.76
69.50
      C-
Western Alliance Bancorp.
WAL
7.24
69.34
      C
Citizens Republic Bancorp.
CRBC
9.45
63.68
      B-
Pacific Capital Bancorp.
PCBC
11.98
62.71
      B-
Regions Financial Corp.
RF
121.80
56.28
      C
SunTrust Banks, Inc.
STI
173.21
56.10
      C-
1
Weiss Financial Strength Rating based on Q2 2012 data and is an aggregate of all affiliated companies

 

Clearly, by any measure, the banking industry enjoyed a very robust year when compared to the broader markets. And the Weiss Undervalued U.S. Bank Stock Portfolio beat them all

Performance Review

Name Description YTD
Return %
Portfolio of 14 undervalued U.S. bank stocks
31.07
KBW Bank Index
Weighted index of 24 geographically diverse banks (BKX)
23.95
S&P Bank Index
Average index of all S&P banks (BIX)
17.76
Regional Banking ETF
Weighted average of regional banks (KRE)
16.00
S&P 500
500 stock average (SPX)
11.53
DOW
30 stock average (INDU)
6.02
1
Weiss Undervalued U.S. Bank Stock Portfolio returns based on nine months ended 10/26/2012

 

Equally important, 2012 brought improved financial strength ratings for U.S. banks and credit unions. You can see in this chart that the number of institutions rated B+ (Good) or higher increased, and the number rated D+ (Weak) or lower decreased.

Weiss Ratings’ Strongest and Weakest Institution Comparison

 

Even some of the largest U.S. banks improved their Weiss Financial Strength Rating in the last year.

 

Much of the improvement in the financial health of U.S. banks is attributable to enhanced profitability and asset quality as institutions found ways to increase revenues, refine operating efficiency and more effectively deal with delinquent loans. These charts illustrate that improvement.

 

Of course we’d all like to know whether this improvement will continue given the uncertainties facing the financial industry—the fiscal cliff, the European financial crisis and the fragile recovery of the U.S. economy.  Uncertainty is rarely a good thing for the markets. And while we see Europe taking many steps to stabilize euro zone economies, their effectiveness remains to be seen. As to the U.S. economy—well, there are signs of recovery, but they remain untested too. It’s just too early to tell. So, stay tuned for next month’s installment as we contemplate the outlook for the bank and credit union industries in 2013.  

To review the most recent bank performance, see Weiss Ratings’ complete lists of the strongest and weakest banks at www.weissratings.com/banklists. Or, access up to 10 financial strength and stock ratings for free at WeissWatchdog.com. And follow Weiss’ domestic and global portfolios for potential value bank stocks.

See also:
Libor Scandal Threatens Major U.S. and Global Banks
European Financial Crisis Looms Larger than Ever
U.S. National Elections—It’s Always About the Economy
Fiscal Cliff Threatens Bank Stocks

Gavin Magor

Gene Kirsch, senior banking analyst at Weiss Ratings, has more than 20 years of financial industry experience in credit-risk management, commercial lending and loan review analysis within various sized credit unions, finance companies and banks at both the retail and commercial level. He leads the firm's bank and thrift ratings division and developed the methodology for Weiss' credit union ratings and global bank ratings.