The big cap American bank stocks have been on a wild ride the past couple of years.

Caught in the center of the hurricane during the financial crisis, the financial stocks plunged to multi-decade lows. Some didn’t even survive. But of those that did, the recovery in the stocks off the March 2009 lows has been nothing short of fantastic.

The “recovery” of the financial stocks was linked to the recovery of the overall economy and the financial sector led stocks out of the wilderness in the spring of 2009 before other sectors stepped up to take over the upward momentum.

That is what makes the developments of the last few months in these stocks even more interesting.

Bearish Sell-Off

The 4 largest U.S. bank stocks, Bank of America, Citigroup, JP Morgan Chase and Wells Fargo, all peaked with the overall market in early April 2010.

3 out of the 4, Citigroup, Bank of America and JP Morgan, hit their high price on April 15, with Wells Fargo following suit on April 21.

Since those April highs, they are all off more than 20%, which would be considered “bearish” territory.

You can see the stock declines from each stock’s April high through the close of trading on Sep 1 below.

JP Morgan -22%
Citigroup -24.1%
Wells Fargo -28%
Bank of America -33.5%

The financial sector was also the hardest hit, overall, in the August market sell-off, losing 10% for the month.

Are the Bank Stocks Sending a Signal?

These large banks led stocks out of the dark times in 2009. Obviously, the massive gains weren’t going to last for forever as the stocks bounced off of what was extremely low valuations to more normalized trading.

The easy trading revenue that had boosted the banks in the last year has turned out to be difficult to maintain which has led to a slowing in revenue gains.

The other divisions, such as investment banking, are still a shadow of their former selves. There are still many issues regarding housing and foreclosures to work through which will likely lead to further loan losses.

A lot of the banks’ issues are similar to what is going on in the overall economy. Some areas look okay and others, like housing, do not.

The recent sharp sell-off could be a signal that investors expect more stress in the financial industry, and, conversely, also in the overall economy.

All investors should be paying close attention to the big cap financials for the rest of 2011.

Where The Banks Stand Today

Citigroup (C) remains the weakest of the big banks and its stock price reflects that. It has a forward P/E of 10.1. It has surprised on the Zacks Consensus Estimate 2 out of the last 4 quarters by an average of 20.6%.

3 estimates have moved higher on 2010 in the last 30 days. The 2010 Zacks Consensus climbed 5 cents to 38 cents in the last 2 months. That is earnings growth of 128% as Citigroup lost $1.34 per share in 2009.

Citigroup is a Zacks #3 Rank (hold) stock. Its shares are, once again, back below $5.


Bank of America (BAC) trades with a forward P/E of 14. This Zacks #3 Rank (hold) stock has surprised on the Zacks Consensus 2 out of the last 4 quarters by an average of 14.4%.

Estimates are mixed, with 1 moving higher and 1 going lower for 2010 over the last month. The 2010 consensus has fallen a penny in that time to 94 cents.

Analysts expect earnings growth of over 500% in 2010 as the company lost 22 cents per share in 2009.

Shares bounced off new 52-week lows this week.


Wells Fargo (WFC) has much more stable fundamentals than some of the others. It was profitable in 2009 as the bank made $1.81 per share, and will be profitable again this year. Analysts expect 16.9% earnings growth in 2010.

1 estimate has moved higher and 1 has moved lower for 2010 in the last month. The 2010 Zacks Consensus has risen 16 cents to $2.12 per share in the last 60 days.

Wells Fargo trades with a forward P/E of 11.7. It is a Zacks #3 Rank (hold) stock.

The stock has been weak in recent sessions, coming close to new 52-week lows before rebounding.


JP Morgan Chase (JPM) is the only one of the four to surprise on the Zacks Consensus each of the last 4 quarters.

3 estimates are higher for 2010 in the last 30 days with one also moving lower. The 2010 Zacks Consensus rose 2 cents to $3.64 in that time.

This is earnings growth of 62.5% over 2009, where earnings came in at $2.24 per share.

JP Morgan is also a Zacks #3 Rank (hold) stock. It has a forward P/E of 10.4.

The stock also traded near its 52-week low in the last few sessions.


Tracey Ryniec is the Value Stock Strategist for She is also the Editor in charge of the market-beating Zacks Value Trader service. You can follow her at

BANK OF AMER CP (BAC): Free Stock Analysis Report
CITIGROUP INC (C): Free Stock Analysis Report
JPMORGAN CHASE (JPM): Free Stock Analysis Report
WELLS FARGO-NEW (WFC): Free Stock Analysis Report
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