How To Value These 4 Major Bank Stocks

By Robert Gordon Today, I will write about how I look at banks in order to analyze the health and profitability of a large bank. Of course, other than scale, the same standards apply as well to smaller banks. In a nutshell, numbers do not matter; ratios and percentages do. I am going to look at a few of what I consider to be the best banks in the industry — and for comparison, another bank that I would not touch with a ten foot pole. A few are fit for long term investing, and it will not take long to find which one is not. While there is a little more to each company’s story than the following chart suggests, this “polaroid” approach is a good start. A company’s ability to maintain a return on assets over one percent is a combination of a good efficiency ratio, a good interest rate spread, and a quality asset base. Among other things, investors should also avoid shrinking banks, which, through paycuts, demonstrate their risk to your capital. That is all banking is: growing an asset base, and maximizing returns on those assets without undue risk. I will look at two large…