Before the global financial crisis and today, America's banking industry has become highly concentrated. So say economic experts. In aftermath of the financial crisis, three of the four top US banks got even bigger.
"Big Four"
The titans of the financial sector in the US for now are:
- Bank of America
- JP Morgan Chase
- Citigroup
- Wells Fargo
During the crisis, the four largest banks, JP Morgan Chase, Bank of America, Citigroup and Wells Fargo, got bigger. Undoubtedly, the US largest financial institutions make an impact far beyond just the banking industry and not only inside the country, but around the whole globe.
According to a national survey, Bank of America, Wells Fargo, Citibank and JP Morgan Chase are ranked among the top banks in the US, each bank has assets of over $1 trillion. The assets of Bank of America and JP Morgan Chase actually exceed $2 trillion.
Some of the banks were weakened by huge losses during the financial crisis, meantime others - suffered far less.
America's Biggest Banks
Bank of America Corp- BAC is the largest bank holding company by assets. It is also the second largest bank by market capitalization. This bank operates in 50 states, the District of Columbia and more than 40 foreign countries.
Bank of America grew through a series of acquisitions. It added new slices to its growing financial services empire in 2003 - FleetBoston Financial; in 2005 - MBNA, becoming the biggest credit card issuer; in 2008 and 2009 - Countrywide Financial and Merrill Lynch & Co., Inc. However, during the financial crisis - Bank of America was weakened by massive losses. The bank lost its position of pre-eminence to JP Morgan Chase.
J. P. Morgan Chase & Company-JPM is a financial holding company, an investment bank, which provides services to individuals, government, financial institutions, private companies in many countries around the world. JP Morgan Chase is the result of the combination of several large U.S. banking companies over the last decade: Chase Manhattan Bank, J.P. Morgan & Co., Washington Mutual, Bank One and Bear Stearns.
"JP Morgan offers the best mix of offense and defense," says John McDonald, a banking analyst at Sanford Bernstein. "Its management has been able to focus...while other managements have been distracted." Chase, which also showed even better growth, has gained status of the strongest national bank. "JP Morgan also could be one of the first major banks to boost its dividend in 2010," writes Andrew Bary, a senior editor at Barron's.
Citigroup Inc- This bank serves approximately 45 million customers in over 90 countries and territories around the world. Citigroup Inc. was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate Travelers Group. Citigroup also suffered huge losses during the global financial crisis in 2008. It was rescued by the U.S. government.
Writing in the Barrons, Andrew Bary believes "Citigroup is the riskiest member of the Big Four, given its weaker near-term profit outlook and the challenge of its good-bank/bad-bank strategy of focusing on its desirable global consumer and commercial banking franchise and its investment bank."
Wells Fargo & Co (WFC)- Wells Fargo, which is the fourth largest bank in the US by assets, is a diversified financial services company with operations around the world. In 2008, Wells Fargo bought Wachovia, which was an independent company and the fourth-largest bank holding company in the US, based on total assets.
Wells Fargo is considered to be among the stronger US financial players. However, it became the last of the major banks to repay the U.S. bailout from the height of the financial crisis. "Wells Fargo, along with JP Morgan, has been profitable throughout the financial crisis, and it has a winning, well-defined strategy, based on cross-selling financial products to consumers and lending to small-to-midsize businesses," Bary writes.
Today, the four largest banks in the US hold half the mortgages in the country. So far, the "Big Four" weathered the economic crisis and showed that they are too big to fail. However, among the "Big Four," JP Morgan and Wells Fargo have the best prospects, believe experts and economists.
Sources
www.ffiec.gov - official web site of The Federal Financial Institutions Examination Council (FFIEC), The Top 50 bank holding companies (BHCs) as of 12/31/2009
www.online.barrons.com - America's premier financial magazine, "Big opportunity in Four banks" by Andrew Bary, Dec. 21, 2009.
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