Thanks to the immense amount of leverage inherent in a bank's business model, the biggest banks in the country also tend to be the biggest companies. You can see this by looking at JPMorgan Chase (NYSE: JPM), the largest bank in America.
Measuring a bank's size
Continue Reading Below
A bank's size is generally denoted by the combined value of assets on its balance sheet. In JPMorgan Chase's case, that would be $2.6 trillion. To put this into context, aside from banks and insurance companies, the next biggest company on the S&P 500 is AT&T, at $444 billion in assets. That's big, no doubt, but it pales in comparison to JPMorgan Chase.
Even among banks, JPMorgan Chase distinguishes itself in this regard. The second biggest bank in the country is Bank of America (NYSE: BAC). It has $2.3 trillion worth of assets. Then come Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C), at $1.94 trillion and $1.89 trillion, respectively.
After these four banks, the next largest drops off significantly in size. That would be Goldman Sachs, the storied investment bank. Goldman Sachs' balance sheet weighs in at $906 billion, according to YCharts.com.
The growth of JPMorgan Chase
JPMorgan Chase hasn't always been the biggest bank in America. Going into the financial crisis, it was the third largest, behind Bank of America and Citigroup.
The fortunes of these three banks changed considerably during the crisis. Citigroup and Bank of America both incurred large losses stemming from toxic credit card loans, as well as the securitization of subprime mortgages. JPMorgan Chase, on the other hand, largely sidestepped these issues.
The net result is that while Bank of America and Citigroup have had to spend much of the past decade retreating and retrenching, JPMorgan Chase was free to grow and acquire market share. The two most potent ways it did so was to acquire Bear Stearns, the fifth largest investment bank at the time, and Washington Mutual -- a massive thrift based in Seattle -- in 2008.
Bank of America also made a major acquisition during the crisis by purchasing Merrill Lynch at right around the same time that JPMorgan Chase bought Washington Mutual. However, after Bank of America's balance sheets peaked in size around 2010, the Charlotte, North Carolina-based bank saw its asset portfolio contract in size, as toxic assets and non-core operations were offloaded to focus the bank's business model around a more narrowly tailored assortment of businesses. It wasn't until the latest quarter, in fact, that Bank of America's assets finally eclipsed their former high.
Meanwhile, Citigroup attempted to acquire a bank during the crisis as well, but it was outbid for Wachovia by Wells Fargo, which, in turn, enabled Wells Fargo to overtake Citigroup in terms of the respective sizes of their balance sheets.
The net result is that JPMorgan Chase was able to step into the void and become the biggest bank in America, replacing Citigroup and Bank of America at the apex of the industry.
10 stocks we like better than Bank of AmericaWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now...and Bank of America wasn't one of them! That's right -- they think these 10 stocks are even better buys.
Click here to learn about these picks!
*Stock Advisor returns as of Oct. 9, 2017