Bank of America Corp (BAC): The Big Bank Temptation in 7 Charts

6. Too Big To Fail

Source: FDIC Quarterly Banking Profile

One thing the Financial Crisis didn’t change is the steadily increasing concentration of bank assets. As of Dec. 31, 2012, the FDIC insured 7,181 institutions. Of those, only 108 had total assets greater than $10 billion.

Put another way, 1.5% of banks control over 80% of total assets.

Five years after the financial crisis the financial system is no stronger systemically than it was prior to the collapse of Lehman Brothers. Goldman Sachs has $939 billion in total assets. Wells Fargo has $1.4 trillion. Bank of America Corp (NYSE:BAC) has $2.2 trillion. JPMorgan has $2.4 trillion. This is a staggering and unprecedented concentration of assets.

It is very difficult to recommend an investment in any of the largest banks when viewed through this concentration risk. The Federal Reserve is doing its best to manage this risk with its public stress tests, but those tests are just simulations run on assumptions. If 2007 proved anything, its that we simply can’t predict the future (particularly “black swan” events).