In this article, we discuss 5 most profitable bank stocks to invest in. If you want to see more most profitable bank stocks to invest in, the risk/reward, and methodology of this list, go directly to 10 Most Profitable Bank Stocks To Invest In.
This list mentions the banks that made the most profit in the United States in 2022 according to YCharts. They are candidates for further research in terms of investments in the long term given they have substantial competitive advantages and are profitable. The stocks might not do well if economic data does not meet expectations or if the banks don’t maintain their market share or profitability as expected, however.
5. Goldman Sachs Group, Inc. (NYSE:GS)
Net Income (TTM) as of December 31, 2022: $11.26 billion
Goldman Sachs Group, Inc. (NYSE:GS) is regarded by many as the most prestigious investment bank in the world even if it isn’t one of the big four American banks. For the trailing twelve months ended December 31, 2022, Goldman Sachs Group, Inc. (NYSE:GS) had net income of $11.26 billion, ROE of 10.2%, and ROTE of 11%. Goldman Sachs Group, Inc. (NYSE:GS)’s book value per share rose 6.7% year over year to $303.55 and the company ranked #1 worldwide in announced and completed mergers and acquisitions. Although it like other stocks could decline in the near term if there is a recession or economic slowdown, Goldman Sachs Group, Inc. (NYSE:GS) has substantial normalized earnings power.
4. Wells Fargo & Company (NYSE:WFC)
Net Income (TTM) as of December 31, 2022: $13.18 billion
Wells Fargo & Company (NYSE:WFC) is one of the big four American banks with net income of $13.18 billion for 2022. In Q4, the company’s net income fell 50% to $2.86 billion given lower mortgage banking on fewer originations. Given substantially higher interest rates, however, Wells Fargo & Company (NYSE:WFC)’s net interest margin has increased from 2.16% in Q1 2022 to 2.39% in Q2 2022, 2.83% in Q3 2022, and 3.14% in Q4 2022. For 2023, Wells Fargo & Company (NYSE:WFC) believes its net interest income could be ~10% higher than the full year 2022 level.
3. Citigroup Inc. (NYSE:C)
Net Income (TTM) as of December 31, 2022: $14.84 billion
Citigroup Inc. (NYSE:C) is another of the big four American banks with substantial scale. For Q4, the company’s profit fell 21% year over year as it set aside money for credit losses in preparation for potentially weaker economic conditions. As a result, Citigroup Inc. (NYSE:C)’s Q4 net income was $2.5 billion versus the net income of $14.84 billion for all of 2022 according to YCharts. In the long term, Citigroup Inc. (NYSE:C) still has earnings growth potential if it maintains its market share.
2. Bank of America Corporation (NYSE:BAC)
Net Income (TTM) as of December 31, 2022: $27.53 billion
Bank of America Corporation (NYSE:BAC) was the second most profitable bank in the United States in 2022 with net income of $27.53 billion. Although the mortgage market has slowed given the higher interest rates, Bank of America Corporation (NYSE:BAC)’s net interest income has increased. For Q4, Bank of America Corporation (NYSE:BAC) CEO Brian Moynihan said, “The themes in the quarter have been consistent all year as organic growth and rates helped deliver the value of our deposit franchise. That coupled with expense management helped drive operating leverage for the sixth consecutive quarter.”
1. JPMorgan Chase & Co. (NYSE:JPM)
Net Income (TTM) as of December 31, 2022: $37.68 billion
JPMorgan Chase & Co. (NYSE:JPM) was the most profitable bank in the United States with full year net income of $37.7 billion in 2022. For the fourth quarter, the bank had net income of $11 billion, $34.5 billion in revenue, and ROTCE of 20%. JPMorgan Chase & Co. (NYSE:JPM) book value was $90.29 per share, up 3% year over year and tangible book value per share was $73.12, up 2% year over year. JPMorgan Chase & Co. (NYSE:JPM) ranks #1 on our list of 10 Most Profitable Bank Stocks To Invest In.
Vltava Fund commented on JPMorgan Chase & Co. (NYSE:JPM) in a Q3 2022 investor letter,
We regard JPM to be the strongest and best- managed bank in the world. It is a leader in investment banking, commercial banking, credit cards, and asset management. Its size (the largest bank in the USA, with nearly USD 4,000 billion in assets) and diversification give it a strong competitive advantage that is compounded by its cost advantages and the high costs to clients associated with switching banks. JPM’s management prides itself on running the only large bank to avoid major instability over the long term.
JP Morgan’s quality and strength first became fully evident in 2008 under the leadership of its CEO Jamie Dimon. Not only did JP Morgan help to stabilize the market by taking over the failing Bear Stearns in the spring of that year, but throughout the Great Financial Crisis it was the only big US bank that did not require government assistance and it was highly profitable even in the difficult year of 2008.
A well-functioning and efficient bank can be a very good long-term investment, because the interest compounding effect works well here. JPM’s return on equity (ROE) is well into the double digits and this puts it in a good position to continue producing better long-term returns than does the market. JPM has been very profitable even during years when interest rates were close to zero. The current – and perhaps not temporary – return to somewhat more normal, higher interest rates should have a significantly positive impact on the bank’s interest income and overall profitability.
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