Moody’s, the big credit-rating agency, recently downgraded 15 of the world’s largest banks. The downgrading, along with JPMorgan Chase’s multibillion-dollar trading loss on risky derivatives, make it clear that big banks aren’t as safe as depositors may think.
But we ordinary people have to keep our money somewhere, despite record-low interest rates on savings. While the FDIC guarantees your deposits, it only insures so much, and there are financial instruments that are not FDIC insured.
To help consumers find the best places to stash our cash, Jon C. Ogg and Samuel Weigley of 24/7 Wall St. have compiled a list of the safest banks. These are the criteria they used. The bank must have:
- A market capitalization of more than $2 billion.
- A share value less than 14 times earnings (P/E ratio), and a share price to book value of less than 2.0.
- A minimum return on equity of 8% or more.
- A dividend yield to its common holders of 2.0% or higher.
- An investment grade credit rating by ratings agencies.
- Wall Street analysts had to value the bank’s share price above the current price.
- A regional bank with more than 100 branches.
- Among the top 50 banks by assets with a large retail banking presence (which excludes the fiduciary banks of State Street Corporation and Bank of New York Mellon).
- “Problem banks,” which include Citigroup Inc. and Bank of America Corporation, were excluded even though it would seem nearly impossible that depositors would have any risk with them.
- Also excluded are regional banks located in the troubled Southeast and the entire Pacific Coast where so many faced financial troubles from housing and lending during and after the recession.
- Also excluded from the list are some of the large banks that have been involved very recently in mergers and acquisitions, as well as banks with questionable viability and survival during another recession.
Here are the Seven Safest Banks. Click on the bank’s name for details:
6. Key Bank