There hasn't been a lot of boasting in the banking industry this year, with most banks bracing for heavy loan losses and lower revenues as a result of the low-rate environment. The sector has lost a lot of ground with most bank indexes falling more than 30% since the beginning of the year.
Still, some banks have managed to shake off the uncertainty brought on by the coronavirus pandemic and keep their stock price close to where it started in 2020, or even above -- a very impressive accomplishment, given the state of things. Here are five top performing bank stocks since the start of the year based on stock price performance.
1. Deutsche Bank
Germany's largest bank has struggled for the last few years, and has certainly seen its fair share of regulatory issues, particularly as it relates to anti-money laundering rules and the Bank Secrecy Act. Its stock price dropped from close to $30 per share in 2015 to $7.78 per share heading into this year. But over the last two quarters, Deutsche Bank (NYSE: DB) has shown some serious progress on the four-year transformation plan it embarked on in 2018. The bank shuttered its equities trading business, trimmed $3 billion in annual expenses, and maintained its pledge to invest heavily in technology. Now trading around $9.64 per share, Deutsche Bank is up about 24% on the year.
2. Live Oak Bancshares
By far the smallest bank on this list, Live Oak Bancshares (NASDAQ: LOB) is now an $8.2 billion asset bank based in Wilmington, North Carolina. Prior to the pandemic, Live Oak specialized in originating U.S. Small Business Administration loans, which positioned it nicely for the Paycheck Protection Program (PPP), and boy, did the bank capitalize. It originated more than $1.7 billion PPP loans, an absolutely massive amount for a bank of its size. The huge PPP loan effort brought in more than $60 million in origination fees, another huge amount for a bank like Live Oak, considering that's almost equivalent to a whole quarter of interest income at the bank. Live Oak's share price has risen from $19.01 per share heading into 2020 year to roughly $21 per share now, for an increase of roughly 10.5%.
3. Silicon Valley Bank
SVB Financial Group (NASDAQ: SIVB), the holding company of Silicon Valley Bank, started the year trading just above $251 per share, and right now is trading at more than $254 per share. The $85 billion asset bank is a niche player, catering heavily to the venture capital and private equity communities, as well as start-ups in the tech and biotech sectors. After the second quarter, charge-offs (debt unlikely to be collected) at the bank were very little at just 0.12% of total loans, and there could be lots of opportunity ahead after the pandemic subsides, as start-ups are usually prevalent following a recession.
4. Morgan Stanley
Another big investment bank, Morgan Stanley (NYSE: MS) began the year trading at $51.12 per share and has recently climbed all the way back to more than $52 per share. Net revenue surged 30% in the second quarter year over year, with the bank's profit also climbing 45% compared to the second quarter of 2019. The record revenue was really driven by Morgan Stanley's institutional securities business, where investment banking revenue climbed nearly 40% from the second quarter of 2019, and sales and equity trading revenue were up a whopping 68% from a year ago. Morgan Stanley also has a strong capital position, with a common equity tier 1 capital ratio, a measure of a bank's core capital expressed as a percentage of its risk-weighted assets, at 16.1%, well above its 13.4% requirement.
5. First Republic Bank
The $128 billion asset First Republic Bank (NYSE: FRC) does not seem to be fazed by the pandemic. The bank, which caters to a lot of high-net-worth individuals, turned a profit of $256.8 million in the second quarter, up about $38 million from the same quarter of 2019. First Republic increased its dividend after the first quarter of the year and seems to have a strong handle on credit, projecting much fewer losses from the pandemic than most other banks. It also seems to have a strong loan portfolio, with little exposure to industries heavily impacted by the pandemic, and loans with strong loan-to-value ratios and high median FICO scores in its portfolio. The bank traded at $117.45 per share heading into the year and is currently trading around $115.67 per share.
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SVB Financial provides credit and banking services to The Motley Fool. Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Live Oak Bancshares and SVB Financial Group. The Motley Fool has a disclosure policy.
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