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"Part of this is about where you start from. Banks have underperformed in seven of the past eight years. The five best performers this year were all in the bottom six in 2011."
So said Barclays banks analyst Jason Goldberg to Financial Times several days ago, addressing the fact that financials was set to be the best performing sector of 2012 for the S&P 500. In total, the 81 financial stocks that are part of the index added $430 billion to the U.S. stock market, raising its aggregate value from $1.53 trillion to $1.98 trillion. Without further ado, here are the past year's five best performing bank stocks, ranked in ascending order by percentage gain.
5. JPMorgan Chase (NYSE: JPM ) : The house that Dimon built closed the year up 25.7%, moving from $34.95 per share to $43.97. The stock's 2012 high point was $46.27, reached on March 28. By June 4, the stock hit its year low of $31, dragged down into the murky depths by the London Whale: the derivatives trader who ended up costing the bank more than $6 billion due to a massive trade gone wrong.
Closing only 5% off its pre-London Whale high was a whale of a recovery for the bank: a big vote of confidence in both Dimon and his team for how they cleaned up the titanic mess.
4. Goldman Sachs (NYSE: GS ) : The house that Blankfein built closed 2012 up 33.77%, moving from $95.36 per share to $127.56. The vampire squid's low point was $91, like JPMorgan's low point also reached on June 4. Goldman's share-price high was $129.72, reached just weeks ago on December 20.
Goldman had its own scandal to deal with in 2012: the high-profile departure of trader Greg Smith, who wrote not just a scathing Op-Ed piece in The New York Times as he left the organization, but an equally scathing book, to boot , in which he called the bank's environment "toxic" and "destructive." In the end, the great muppet caper turned out to be much ado about nothing, or at least very little.
3. Citigroup (NYSE: C ) : The house that Pandit was unceremoniously ejected from closed the year up 39.64%, moving from $28.17 per share to $39.56. Citi also found itself in the summer doldrums, hitting its low point on June 4, as well: $24.82. It's high point was $40.17, reached on December 20, the same day Goldman's share price hit its yearly high point. There must be something in the water on Wall Street.
The scandal (of sorts) out of Citi in 2012 was CEO Vikram Pandit's abrupt exit from the bank in October, engineered by chairman Michael O'Neill. The two, apparently, didn't see eye to eye on many issues, but Pandit was still reportedly caught very much off guard by the corporate coup, as were shareholders.
2. Regions Financial (NYSE: RF ) : Some surprise, as we move far away from Wall Street for our No. 2 performer: This Alabama-based regional star closed up 63.91% for the year, moving from its low of $4.35 per share to $7.13. Again, except for a dip into the summer doldrums, which saw Regions share price hit $5.50, the stock was a steady climber throughout 2012; it hit its high of $7.62 on September 19.
Some bad news for Regions surfaced just last month, with Reuters reporting that the bank is currently, or has been, investigated by no less than five federal and state entities for the possibility it misclassified loans that went south during the financial crisis. No charges have yet been filed, but this development for Regions might mean regulators and prosecutors are shifting their legal gaze from financial-crash shenanigans at the big banks to financial-crash shenanigans at the regional banks.
1. Bank of America (NYSE: BAC ) : To any investors following the financial sector in 2012, it will come perhaps as no surprise that B of A is the year's top financials performer: moving from $5.81 per share to its year high of $11.61, for a whopping percentage gain of 100.17%. At the height of the financial crisis, in February 2009, B of A's stock traded for as low as $3.95.
How to make money with your eyes closed
Again, Barclays Jason Goldberg: "You could have bought all the worst [banking] stocks at the end of last year, closed your eyes and made a boatload of money." I hope you did, Foolish readers, and I wish I had.
The entire banking sector has come a long way since the crash, but it could be argued that B of A -- still trying to repair a balance sheet scarred by the purchase of Countrywide Financial, and still gun-shy when it comes to home-lending -- has come the farthest. To learn more about the most-talked-about bank out there, check out our in-depth report on B of A. The report details the superbank's prospects, including three reasons to buy and three reasons to sell. Just click here for full access.