1 Fascinating Chart About Banks: Bank of America Corp (BAC) and More

The third and final insight concerns the four too-big-to-fail banks — Wells Fargo & Company (NYSE:WFC) , Bank of America, Citigroup Inc. (NYSE:C), and JPMorgan Chase & Co. (NYSE:JPM) — amassed between the custodial banks on the far right and the regional banks on the left. As you can see, with the exception of Wells Fargo, less than half of the assets on these banks’ balance sheets are loans, with considerably more securities and cash than their peers.

What gives? The answer is that all of these banks have large trading and investment banking operations that demand assets of their own. JPMorgan is a perfect example. While it has an enormous retail presence through its Chase subsidiary, it is first and foremost an investment bank. And it’s for this same reason that these banks are obligated to hold so much cash (notice the concentration of yellow on the chart above these banks) in case something goes wrong, as JPMorgan saw with the $6 billion London Whale scandal.

What’s the point?
The point here is simple. Bank stocks have paid off in spades over the past year as the housing market recovers and lenders make more and better loans. But some banks are better positioned than others to reap the benefits of these tailwinds — namely, those with large retail lending operations. And it’s for this reason you should always get to know a bank before investing in it.

The article 1 Fascinating Chart About Banks originally appeared on Fool.com and is written by John Maxfield.

John Maxfield owns shares of Bank of America. The Motley Fool recommends Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, and Wells Fargo.

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