If you invest in the nation's largest banks, you should be able to rest easy knowing their executives will be responsible stewards of your capital. But as we've come to learn, this simply isn't always the case.
Over the last five years, investors have been witness to one of the most egregious waves of wealth destruction in the history of domestic banking. Nearly 500 banks have failed since the beginning of 2008, and many more are still shells of what they once were.
Among the big banks in particular, seven have separated themselves from the pack in this regard. Between the beginning of 2008 and the end of 2012, they destroyed an average of 31% of the shareholder value in their respective companies.
As you can see in the figure above, which charts the deterioration in book value per share net of dividends, Huntington Bancshares (HBAN 0.95%) leads the way, with a 49% decrease in total shareholder value.
Citigroup (C -0.32%) is next with a 44% decline, followed by Regions Financial (RF 2.17%), Zions Bancorp (ZION 1.01%), and KeyCorp with declines of 39%, 33%, and 19%, respectively.
Rounding out the list are Bank of America (BAC -0.13%) and SunTrust Banks, with reductions of 18% and 16%.
The precise facts underlying each of these performances vary, but there are two commonalities.
First and foremost, even once you include all five years of earnings, four of the banks still lost money. Citigroup is the worst offender, with a five-year net loss of $24.4 billion. Regions Financial is second with a loss of $6.2 billion, followed by losses of $2.1 billion and $1.3 billion at Huntington and Zions, respectively.
And the second commonality is that these banks were the worst when it came to diluting their shareholder bases with new shares issued at unconscionable valuations. Citigroup's share count increased more than fivefold while Regions, Bank of America, and Huntington more than doubled theirs.
