Wells Fargo (NYSE: WFC) and US Bancorp (NYSE: USB) both reported earnings this morning, and the message is clear: The credit crisis is effectively over -- if only for the largest U.S. banks.

The numbers to prove it
JPMorgan Chase (NYSE: JPM) set the tone last week, beating Wall Street estimates thanks to lower credit costs and loan growth. Today's numbers from Wells Fargo and US Bancorp appear to confirm those trends:

Metric

Wells Fargo

US Bancorp

Q4 EPS: Consensus Estimate vs. Actual

$0.61/ $0.61

$0.46/ $0.49
Total Loan Growth vs. Q3

2% (ann.)

1.5%
Reserve release*

$875 million

$25 million
Tier 1 Common Equity Ratio

8.4% 
(Basel 3 est.: 6.9%)

7.8%

 Source: Company press releases.
*The reserve release is the amount by which net charge-offs exceeded loan loss provisions.

These trends are consistent with (and favor) a basket trade I highlighted at the end of November, which consisted of buying the top four U.S. commercial banks, on the assumption that the price tag for this dominant group of companies was very cheap. So far, the market appears to be coming around to that notion:

Company

Return (Price only)
Nov. 24, 2010 – Jan. 18, 2011

Forward P/E 
(Next 12 months' est. earnings)

Bank of America (NYSE: BAC)

33%

11.9
Citigroup (NYSE: C)

15.2%

10.9
JPMorgan Chase

17.3%

9.4
Wells Fargo

19.8%

12.0
Basket*

21.2%

11.0
S&P 500

8.1%

14.7

Source: Standard & Poor's, a division of Capital IQ, and State Street Global Advisors.
* Weighted by float-adjusted market-capitalization.

Of course, the outperformance could reverse in the short term, but I expect it to widen over the next 12 to 18 months.

Please sir, can I have some more dividends?
As far as dividend increases go, Wells Fargo and US Bancorp look like frontrunners to receive the go-ahead from regulators (along with JPMorgan Chase). Neither bank has the highest capital ratios in the industry, but they are well-capitalized, and they have no material exposure to investment banking. Thus, I think there are good odds that they'll conduct a first-quarter dividend hike.

Will an increase drive further price appreciation? If income-oriented investors/ funds return to these stocks, it's certainly possible. Regardless, the market is bound to revalue the bank basket shares, as the trends I mentioned above continue to reveal this group's formidable earnings power.