Last week, an audit by the TARP program's government watchdog suggested that a wide majority (83%) of banks that have received TARP investments had, in fact, put some of the funds to work by lending them out. That may well be true, but recently released second-quarter results show that the amount of total loans at the largest banks -- all TARP recipients -- fell during the period:


Quarter-on-Quarter Loan Growth
(Q2 2009/Q1 2009)

Year-on-Year Loan Growth
(Q2 2009/Q2 2008)

US Bancorp (NYSE:USB)



Citigroup (NYSE:C)



Wells Fargo (NYSE:WFC)


Not comparable due to Wachovia acquisition.

Bank of America (NYSE:BAC)


Not comparable due to Countrywide acquisition.

PNC Financial (NYSE:PNC)


Not comparable due to National City acquisition.

JPMorgan Chase (NYSE:JPM)


Not comparable due to Washington Mutual acquisition.

Total (6 Banks)



Source: Company documents.

Furthermore, much of the new loan volume in the quarter owed either to mortgage refinancings or renewals of existing credit lines to businesses.

Sorting the winners from the losers
The table above suggests that Citigroup, U.S. Bancorp, and Wells Fargo gained market share during the quarter, while Bank of America, JPMorgan Chase, and PNC Financial lost ground. In that regard, US Bancorp looks particularly impressive, clocking up year-on-year loan growth of nearly 10%. But what price must investors pay for performance? The following table contains some clues:

Company Name

Price/Earnings (estimated FY2010 earnings)

Price/Book Value

Price/Tangible Book Value

US Bancorp




Wells Fargo




JPMorgan Chase




PNC Financial




Bank of America








Source: Capital IQ, a division of Standard & Poor's.

Of the three "winners" I referred to earlier, I certainly prefer Wells Fargo and US Bancorp; they're simply better-run organizations than Citigroup, which is still a basket case. Apparently, I'm not alone -- both are at the top (read: "expensive") end of this group, whether it be in terms of price-to-earnings, price-to-book value, or price-to-tangible book value.

My top three
All the same, it looks like paying up is worthwhile in this case; I think Wells and US Bancorp offer good prospects of outperforming their peers -- and the broader market -- on a risk-adjusted basis over the next 10 years. Still, I need to mention JPMorgan Chase: Paying a measly 2% premium over book value for this superbly-run bank looks very inviting, indeed.

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Fool contributor Alex Dumortier, CFA has a beneficial interest in Wells Fargo, but not in any of the other companies mentioned in this article. The Motley Fool's disclosure policy sits anywhere it wants.