3 Bank Investing Mistakes to Avoid in 2013: JPMorgan Chase & Co. (JPM), Wells Fargo & Co (WFC), Bank of America Corp (BAC)

3. Not paying enough attention to balance sheet quality
This is what separates the JPMorgans from the Bank of Americas, and the Wells Fargos from the Citigroups: what’s on the balance sheet.

It’s no secret that Bank of America Corp (NYSE:BAC) and Citigroup got caught up in some of the worst aspects of the behavior that led directly to the financial crisis, particularly subprime lending. It’s also no secret that JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC) kept their noses (relatively) clean in this regard. As a result, JPMorgan was doing so well as other banks were simultaneously crashing that it was able to buy up the quickly failing Bear Stearns (insolvent due to toxic-mortgage issues) at a bargain price.

Likewise, Wells Fargo & Co (NYSE:WFC) came through the crisis by keeping its lending practices conservative. Alternately, B of A paid out billions in 2012 and will pay out billions more in 2013 for the junk it loaded onto its balance sheet in the run-up to the crisis. And while Citigroup spun off the worst of its toxic assets into a “bad bank,” ultimately, Citi is still responsible for dealing with them.

In banking, what happens on the books stays on the books.

Foolish bottom line
Like in any other sector of the economy, there’s money to be made by investing in banks. They may require more time and attention than your run-of-the-mill consumer goods company, but the benefits and payoff — as noted above — can make it very worth your while.

The article 3 Bank Investing Mistakes to Avoid in 2013 originally appeared on Fool.com and is written by John Grgurich.

Fool contributor John Grgurich owns shares of Goldman Sachs and JPMorgan Chase & Co (NYSE:JPM). Follow John’s dispatches from the bleeding heart of capitalism on Twitter @TMFGrgurich. The Motley Fool recommends Goldman Sachs and Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo.

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