What's Better Than Hard Assets? Financial Assets

I'd never have believed it had I not seen two charts this morning courtesy of www.strategasrp.com. Each shows banks relative to gold, expressed as a price ratio. The first is U.S. banks, the second is European banks.



Banks are outperforming gold for the first time since 2008. While the shift is due in part to gold's first annual decline in 12 years, banks are also outperforming the broader market (the KBW Banks Index has added almost 33 percent so far this year vs a gain of almost 27 percent for the S&P 500 Index).

A number of factors support investors' willingness to buy banks:

--Mortgage delinquencies of 6.41 percent are the lowest since 2Q 2008.

--Credit card delinquencies of 0.91 percent are below pre-crisis levels.

--Total U.S. commercial bank loan volume has risen 2.4 percent close to a record $7.35T

So, today we screened the combined 64 banks in the S&P 500 and Euro Stoxx 600 indexes for the best capitalized banks with the best returns. Specifically, note the 16 banks with Tier 1 Capital Ratios and returns on equity greater than 10 percent. In other words, they have plenty of capital and they're generating strong returns. Curiously, Europe claims 10 of the 16 top positions, four of which are in Scandinavian countries.


Here are the tickers, including country codes on the Bloomberg terminal:


Blog readers may be curious to note five additional lenders who narrowly missed our criteria. Each is well capitalized, but had an ROE slightly below 10 percent. They are: BB&T Corp. (BBT ), HSBC Holdings (HSBA LN ), JPMorgan Chase & Co. (JPM ), KeyCorp (KEY ), and Standard Chartered Plc (STAN LN ).

Before it's here, it's on the Bloomberg Terminal.