Deep Dive

10 U.S. banks that have been the best earnings performers over the past 15 years — are any of them bargain stocks now?

These banks have had the best overall returns on assets through thick and thin

American Express ranks highest for 15 years for return on average assets among large U.S. banks.

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Now that the market has calmed down a bit following the pummeling of financial stocks in the wake of the failures of Silicon Valley Bank and Signature Bank of New York, it might help to focus on consistent quality.

Below is a list of U.S. banks and bank holding companies that have had the highest average returns on assets (ROAA) over the past 15 full years. This might be of use to investors looking for bargains, following a 25% decline for the KBW Nasdaq Bank Index BKX for one week through Monday. At the same time, the financial sector of the S&P 500 SPX fell 12%. (All returns in this article include reinvested dividends.)

Some of the stocks appear inexpensive — at least when comparing their current price-to-tangible-book-value ratios to their long-term averages.

What’s a bank? Sometimes the waters can be a bit muddy, as some people might think that a bank that provides brokerage and investment-banking service isn’t a “real” bank. The same might be said for a credit-card lender.

For the following screen, we began with the Russell 3000 Index RUA, which is designed to include about 98% of publicly listed U.S. companies by market capitalization.

To confirm whether or not certain companies, such as Discover Financial Services DFS are “really” bank holding companies, we either looked at their 10-K filings for business descriptions or at the Federal Financial Institutions Examinations Council’s National Information Center, where anyone can search for a financial company and access its Consolidated Financial Statements for Bank Holding Companies, if applicable. Here’s a direct link to the Dec. 31 report for Discover.

It turns out there were 78 banks or bank holding companies in the Russell 3000 that had total assets of at least $20 billion as of Dec. 31. The list includes the failed Silicon Valley Bank, which was held by SVB Financial Group SIVB, and Signature Bank SBNY of New York, but neither ranked within the top 20 for ROAA for 15 year (or 10 years) through Dec. 31.

Here’s some of the latest coverage of the fallout from the bank failures:

Banks with best 15-year earnings performance

Among banks and bank holding companies in the Russell 3000 with total assets of at least $20 billion as of Dec. 31, these 10 had the best returns on average assets, based on 15 years of annual data provided by FactSet:

Bank or bank holding company Ticker City 15-year ROAA 10-year ROAA Total return – 15 years Total return – 10 years
American Express Co. AXP New York 2.99% 3.22% 370% 179%
Discover Financial Services DFS Riverwoods, Ill. 2.80% 2.84% 703% 178%
Bank OZK OZK Little Rock, Ark. 1.99% 1.99% 797% 117%
Raymond James Financial Inc. RJF St. Petersburg, Fla. 1.85% 2.14% 625% 227%
Stifel Financial Corp. SF St. Louis 1.82% 1.62% 370% 144%
Home BancShares Inc. HOMB Conway, Ark. 1.41% 1.61% 559% 197%
Prosperity Bancshares Inc. PB Houston 1.35% 1.36% 202% 67%
U.S. Bancorp USB Minneapolis 1.32% 1.36% 68% 43%
Commerce Bancshares Inc. CBSH Kansas City, Mo.

1.27% 1.32% 304% 192%
Capital One Financial Corp. COF McLean, Va. 1.26% 1.40% 142% 105%
Source: FactSet

Click on the tickers for more about each bank.

Read?Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

Notes about the data:

  • In addition to the 15-year ROAA upon which the screen is based, we have included 10-year average ROAA 10-year figures to shed light on more recent performance.
  • Shares of seven of the 10 banks on the list have had 15-year total returns exceeding the S&P 500’s 15-year return of 297%. Only two of the 10 have had 10-year returns exceeding the S&P 500’s 10-year return 200%.
  • American Express Co. has had the best 15-year ROAA, and has also ranked best among these companies for 10-year ROAA. But Bank OZK has had the highest 15-year total return of 797%, followed by 703% for Discover and 625% for Raymond James Financial.

Now you might wonder about the banks’ current valuations. How do they compare to what is typical? Here’s the list again, showing current prices divided by trailing tangible book value, along with 10-year and 15-year averages these ratios:

Bank or bank holding company Ticker Price/ tangible book value 10-year average 15-year average
American Express Co. AXP 5.82 5.21 4.84
Discover Financial Services DFS 2.05 2.53 2.22
Bank OZK OZK 1.20 2.29 2.26
Raymond James Financial Inc. RJF 2.55 2.24 2.04
Stifel Financial Corp. SF 1.90 2.20 2.22
Home BancShares Inc. HOMB 2.19 2.99 2.63
Prosperity Bancshares Inc. PB 1.70 2.58 2.94
U.S. Bancorp USB 2.03 2.45 2.72
Commerce Bancshares Inc. CBSH 3.30 2.44 2.24
Capital One Financial Corp. COF 0.98 1.27 1.34
Source: FactSet

Seven of these banks are trading at P/TBV ratios below their 10-year and 15-year averages.

If you see any company of interest here, your next step should be to do your own research and form your own opinion of how well it might perform over the next decade at least.