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It's not unusual for Bank of America (NYSE: BAC ) to perform miserably on any given survey or ranking. Whether it is being graded on its reputation, its customer service, or how it performs in the mortgage arena, the big bank usually gets a double thumbs-down, often coming in dead last.
That's bad enough when you're gauging people's attitudes -- which is important -- but a lousy score on a measure of profitability is worse still. Unfortunately, a recent assessment of the banking industry rated B of A as the worst performing of the nation's largest financial institutions.
Lowest indicators on nearly every metric
A new evaluation by Bank Director magazine scores banks on five criteria, breaking up institutions by size. The 2013 Bank Performance Scorecard looked at each bank's core return on average assets and core return on average equity to determine profitability, and established capital strength using a ratio of tangible common equity to tangible assets. Asset quality was determined by comparing the net charge-offs to average loans, as well as nonperforming assets to all loans, and real estate owned.
In the "$50 Billion and Above" category, Bank of America was compared to 18 other banks and came in at position No. 19. While the magazine acknowledged that the first three criteria were weighted more heavily than the two measurements of asset quality, it was also noted that the best-performing banks generally did well in every category.
While Bank of America did poorly across all categories, it came out looking especially feeble in the performance department, sporting a return on average assets, or ROAA, value of 0.22%, and a return on average equity, or ROAE, of slightly more than 2%. For comparison, Wells Fargo (NYSE: WFC ) , which ranked No. 5, showed ratios of 1.47% on the first, and 13.17% on the second metric.
Big regionals took the top spots
Regionals smoked the bigger banks, and the top spot went to Huntington Bancshares (NASDAQ: HBAN ) , followed by M&T Bank (NYSE: MTB ) . Both of these institutions have put a lot of work into becoming more robust over the past few years. Huntington, for example, has made an amazing recovery from the dark days of the financial crisis, while M&T has been busy expanding its footprint, most recently by its planned acquisition of Hudson City Bancorp (UNKNOWN: HCBK.DL ) .
Lest you think that Bank Director may have been especially harsh with B of A, Forbes' 2012 listing of America's Best and Worst Banks also gave the big guy a pretty pitiful score, ranking it at 86 out of 100 -- with a ROAE of 2.3%.
Bank of America still has a lot of work to do
The bank has made some great strides since CEO Brian Moynihan has been at the helm, but it's obvious that much still needs to be done. Moynihan's ministrations have had some positive effects, to be sure -- the bank's capital ratios have practically come back from the dead -- but issues such as improving mortgage lending and customer service seem stuck in neutral. Profitability, obviously, is an even bigger problem.
As long as the bank continues to struggle with stagnant profits and nagging legal problems, investors will bide their time, waiting until some real progress is made before putting their faith in the big bank again. At the current rate of improvement, that day could be a long time coming.
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