JPMorgan Chase & Co. (JPM), Bank of America Corp (BAC): From Safest to the New Bad Bank

The fourth quarter profits at Goldman Sachs saw an over two-fold increase from a year ago, while revenues increased 53%. The results were positively impacted by strong gains in debt and equity underwriting businesses. Trading revenues also supported the quarter’s bottom line.

Liquidity & Capital Position

At the end of the full year 2012, JPMorgan reported a Tier 1 capital ratio of 12.6%, up from the prior year’s 12.3%. Its liquidity position, represented by its deposit-to-loan ratio improved from 156 in 2011 to 163. JPMorgan Chase & Co. (NYSE:JPM)’s projected Q4 tier 1 common capital ratio came in at 6.8%, just under Citigroup’s 6.9%, which is the highest among the most recent stress test results.

Bank of America Corp (NYSE:BAC) reported a Tier 1 capital ratio of 12.89%, up from its prior year’s 12.4%. The bank’s loan-to-deposit ratio came in at 82%, compared to 90%.

Citigroup’s capital position, as measured by its Tier 1 capital ratio, was 14.06%, up from the prior year’s 13.55%. The bank’s loan to deposit ratio remained at 58% at the end of the full year 2012.

The Tier 1 capital ratio for Goldman Sachs was 16.7% at the end of 2012, compared with 13.8% at the end of 2011.

Valuations

JPMorgan Chase & Co. (NYSE:JPM) is currently trading at a moderate 4% discount to its most recent quarter’s book value. This is compared to 38% and 27% discounts for Bank of America Corp (NYSE:BAC) and Citigroup, while Goldman Sachs is trading in line with its book value.

Conclusion

A comparison with the peers revealed that JPMorgan Chase & Co. (NYSE:JPM) has turned from the safest bank to the new bad bank. Despite posting superior performance during the recent quarters, the bank’s capital plan was only conditionally approved by the Fed as the regulators believed the bank exhibited weaknesses that required immediate attention. The bank’s liquidity and capital positions are also not one of the strongest at the moment.

The article JPM: From Safest to the New Bad Bank originally appeared on Fool.com and is written by Adnan Khan.

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