Why U.S. Bancorp Could Be Better Than The 'Big Four'

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The United States has four massive banks: JPMorgan Chase & Co. JPM, Wells Fargo & Co WFC, Bank of America Corp BAC and Citigroup Inc C, often referred to as “The Big Four.”

This article's attention, however, falls on No. 5: U.S. Bancorp USB. Over the last five years, USB has outperformed all other peers besides Wells Fargo.

This is the only of the mega-cap U.S. banks that didn’t want, need or initially accept TARP funds. In fact, the bank was forced to take TARP to disrupt financial markets by pointing a glaring finger at how bruised the "Big Four" were.

In fact, here’s a quote from then-CEO Richard Davis:

“We were told to take [TARP] so that we could help Darwin synthesize the weaker banks and acquire those and put them under different leadership.”

Although the markets are now long past the Great Recession, U.S. Bancorp is still worth watching. Let's investigate why. 

First, let’s look at total assets on the x-axis and total revenue on the y-axis. This gives a great perspective on size.

Clearly, there is the “Big Four,” and then everybody else. The largest of the “everybody else” is USB.

Now, let’s turn to multiple time series charts that will start to look the same…every time.

First, let's chart a time series of net income margin percentage. USB is at the top, Wells Fargo is second and Bank of America is the worst.

Next, let’s look at a time series of net income over assets, a.k.a. return on assets (ROA). USB is at the top, Wells Fargo is second and Bank of America is last.

Now, let’s start looking at risk.

The next time series illustrates non-performing loans over total loans. USB has the smallest number (that would be the “best”); Bank of America and Wells Fargo are tied for “worst.”

Next, let's look at tier 1 capital ratio percentage -- the most fundamental measure of a bank's solvency. USB is at the top…again.

Now, let’s really dig into risk, and move into scatter plots. This final chart shows non-performing loans over total loans on the x-axis, and loans 90-days past due (but still accruing interest) on the y-axis.

There are two obvious phenomena:

1. USB has -- by far -- the least risk in both categories.

2. Bank of America has -- by far -- the greatest risk in both categories.

So, here's the conclusion. USB, when compared to the “Big Four,” has:

1. The best net income margin percentage

2. The best return on assets

3. The lowest non-performing loans over total loans

4. The highest tier capital ratio percentage

5. The fewest late loans still accruing interest

Introducing U.S. Bancorp, the fifth-largest bank in the United States.

Ophir Gottlieb can be found on Twitter @OphirGottlieb

Image credit: DangApricot, Wikimedia