The Capital Strength Of The 20 Largest Banks In America

As Greece flirts with default, the focus in the U.S. is shifting to the capital strength of domestic banks with plenty to lose. DealBook's Peter Eavis reports that five of the biggest U.S. banks, including JPMorgan Chase and Goldman Sachs, have more than $80 billion exposure to the riskiest European sovereigns — Greece, Ireland, Italy, Portugal and Spain. And the credit default swaps the banks bought to protect themselves against a credit event may never pay out.
But there's more to worry about than Europe, based on a handy new note from Royal Bank of Canada that details the capital ratios of the 20 biggest US banks in the fourth quarter of 2011.
It shows a rise in the banks' average Tier 1 capital ratio to 10.45 percent, from 10.29 percent in the third quarter, reflecting divestments and capital raising throughout the industry.
But under the incoming Basel III capital rules, which are set to drag down the average Tier 1 ratio to 9.00 percent, some of the largest lenders, which tend to lag regional firms, will need to do more to meet the new 8.5 percent requirement.
While non-performing assets and charge-offs generally declined in the fourth quarter, any turnaround could also force banks to raise more capital in stressed markets — and there are already plenty of jitters.

20. M&T Bank Corporation

Current Tier 1 capital ratio: 6.86% (down from 6.87% in Q3)
Under Basel III: NA
With the lowest capital ratio of all the major banks studied by RBC, M&T suffered a rise in charge-offs in the fourth quarter (to 0.50 percent of average loans, from 0.39 percent in the quarter earlier) but reduced its non-performing assets to 2.70 percent of all loans (from 2.90 percent in Q3).

19. Regions Financial Corporation

Current Tier 1 capital ratio: 8.50% (up from 8.16% in Q3)
Under Basel III: 7.70% (unchanged)
Regions Financial pushed down its non-performing assets to 7.96 per cent of total loans in the fourth quarter (from 8.19 percent during the previous quarter), and also improved charge-offs to 2.16 percent of average loans (from 2.51 percent).

18. US Bancorp

US Bancorp CEO Richard Davis

Current Tier 1 capital ratio: 8.60% (up from 8.47% in Q3)
Under Basel III: 8.20% (unchanged)
A recovery in problem loans helped lift US Bancorp's fourth-quarter profit, as non-performing assets fell to 3.27 percent of total loans (from 3.56 percent in the previous quarter) and charge-offs declined to 1.16 percent of average loans (from 1.38 percent).
The bank expects further credit improvements as the U.S. economy strengthens.

17. SunTrust Banks

Current Tier 1 capital ratio: 9.25% (down from 9.31% in Q3)
Under Basel III: NA (9.65% in Q3)
One of a host of banks setting aside less for doubtful loans after delivering a higher fourth-quarter profit, SunTrust shrank non-performing assets to 6.53 percent of total loans (down from 6.90 percent in the third quarter) and cut charge-offs to 1.55 percent (from 1.67 percent).

16. Fifth Third Bancorp

Current Tier 1 capital ratio: 9.34% (up from 9.33% in Q3)
Under Basel III: 9.70% (down from 9.80%)
The Midwestern regional bank is setting aside less cash for problem loans after charge-offs declined to 1.16 percent in the fourth quarter (from 1.31 percent), alongside non-performing assets at 5.29 percent (from 5.29 percent).

15. Wells Fargo

Current Tier 1 capital ratio: 9.46% (up from 9.34% in Q3)
Under Basel III: 7.49% (up from 7.41%)
Wells Fargo, the largest bank by market value, cut non-performing assets to 5.23 percent in the fourth quarter (from 5.36 percent in the quarter prior) and also reduced its charge-offs to 1.30 percent (from 1.32 percent).
The bank is considering returning capital to shareholders after delivering a record quarterly profit.

14. Zions Bancorporation

Current Tier 1 capital ratio: 9.53% (up from 9.53% in Q3)
Under Basel III: 7.90% (Q3 data unavailable)
Zions Bancorporation swung back to profit in the fourth quarter as non-performing assets declined to 3.93 percent (from 4.56 percent) and charge-offs fell to 1.05 percent (from 1.13 percent).

13. Capital One Financial Corporation

Current Tier 1 capital ratio: 9.70% (down from 10.00% in Q3)
Under Basel III: 9.80% (down from 10.10%)
Capital One's fourth-quarter profit tumbled more than 40 percent as the bank put away extra funds to cover problem loans.At the same time, its charge-offs increased to 2.66 percent (from 3.00 percent) while non-performing loans were slightly lower at 2.88 percent (from 3.00 in the third quarter).

12. BB&T Corporation

Current Tier 1 capital ratio: 9.70% (down from 9.78% in Q3)
Under Basel III: 8.80% (unchanged)
One of the few banks to remain profitable during the crisis, the North Caroline bank impressed with its fourth-quarter profit. Non-performing assets also fell to 3.36 percent (from 4.07 percent), as charge-offs held steady around 1.47 percent.

11. Bank of America

Current Tier 1 capital ratio: 9.86% (up from 8.65% in Q3)
Under Basel III: 7.25% to 7.50% (up from 6.39%)
The big jump in BofA's capital ratios reflects a string of divestments aimed at shoring up the bank's balance sheet, helping lift its fourth-quarter profit. At the same time, its non-performing assets fell to 5.45 percent (from 5.59 percent in the quarter prior) alongside charge-offs, which shrank to 1.71 percent (from 2.12 percent)
However, the bank has only covered 12 percent of its exposure to risky European sovereigns with credit default swaps, which could come back to bite.

10. JPMorgan Chase

Current Tier 1 capital ratio: 10.00% (up from 9.88% in Q3)
Under Basel III: 7.90% (up from 7.70%)
While JPMorgan reduced non-performing loans to 3.89 percent in the fourth quarter (from 4.20 per cent the previous quarter), it suffered a rise in charge-offs (from 1.45 percent to 1.65 percent) and weaker profits in the same period.
Chief executive Jamie Dimon also says he is "increasingly worried" about Europe's debt crisis, which still threatens to smash US banks.

9. Huntington Bancshares Incorporated

Current Tier 1 capital ratio: 10.00% (down from 10.17% in Q3)
Under Basel III: NA
Huntington Bancshares experienced a rise in non-performing assets, which reached 3.35 percent in the fourth quarter (up from 3.13 percent), while charge-offs fell to 0.84 percent (from 0.92 percent). After lifting its quarterly profit, the bank is setting aside less money for problem loans.

8. PNC Financial Services Group

Current Tier 1 capital ratio: 10.30% (down from 10.49% in Q3)
Under Basel III: 8.00% to 8.51%
Lower revenue dragged down PNC Financial's fourth-quarter profit, but non-performing assets were less of a concern at 3.58 per cent (down from 3.76 percent), as were charge-offs at 0.82 percent (compared to 0.95 percent during the previous quarter).

7. Comerica Incorporated

Commerica CEO Ralph Babb

Current Tier 1 capital ratio: 10.31% (down from 10.57% in Q3)
Under Basel III: NA
While Comerica delivered a flat fourth-quarter result due to the cost of a recent acquisition, the regional lender managed to reduce its charge-offs to 0.57 percent (from 0.77 percent) while it cut non-performing assets to 2.66 percent (from 2.95 percent).

6. KeyCorp

Current Tier 1 capital ratio: 11.28% (unchanged)
Under Basel III: NA
The small mid-west bank's fourth-quarter profit beat estimates as charge-offs fell to 0.86 percent (from 0.90 percent). However, KeyCorp's non-performing assets climbed to 2.80 percent (from 2.12 percent) over the same period.

5. Citigroup

Current Tier 1 capital ratio: 11.80% (up from 11.71% in Q3)
Under Basel III: NA
While Citigroup boats the best capital ratio of any of the big four banks, its non-performing loans were at 8.05 percent in the fourth quarter (down from 8.42 percent) as charge-offs declined to 2.54 percent (from 2.77 percent).
Citigroup says it is well-protected from a credit event in Europe, with 47 percent of its exposure to the continent's troubled sovereigns covered by credit default swaps, but there's no guarantee the stressed insurers will be able to pay out.
The bank also posted a weaker fourth-quarter profit as its investment banking and trading operations faltered.

4. Popular Inc

Current Tier 1 capital ratio: 12.10% (up from 12.02% in Q3)
Under Basel III: NA
Improved credit quality helped return Popular to profit in the fourth quarter, as charge-offs fell (to 2.42 percent from 2.58 percent) and non-performing loans were cut (to 11.40 percent from 13.72 percent).

3. Northern Trust Corporation

Current Tier 1 capital ratio: 12.10% (up from 11.76% in Q3)
Under Basel III: 12.30% (up from 11.80%)
Northern Trust, which is implementing a major cost-cutting program as profits slide, experienced a reduction in non-performing assets (to 1.08 percent, from 1.18 percent) and charge-offs (at 0.25 percent, down from 0.40 percent) during the fourth quarter.

2. Bank of New York Mellon Corporation

Current Tier 1 capital ratio: 13.40% (up from 12.48% in Q3)
Under Basel III: 7.10% (up from 6.60%) Non-performing assets have risen to 1.36 percent of total loans in the fourth quarter (from 1.40 percent in Q3) alongside charge-offs, which are down to 0.22 percent (from 0.15 percent), as fourth-quarter earnings missed expectations.

1. State Street Corporation

Current Tier 1 capital ratio: 16.90% (up from 15.96% in Q3)
Under Basel III: 14.50% (up from 10.10%) At State Street, with by far the highest Tier 1 ratio of any US bank, non-performing assets have fallen to 3.06 percent in the fourth quarter (from 2.87 percent) and net charge-offs have disappeared (from 1.04 percent during Q3).
The firm, which missed profit expectations in the fourth quarter, has embarked on a major cost-cutting program — including slashing staff.