2008 is a year that the financial service sector would rather forget. The Financial Select Sector SPDR (NYSE: XLF) crumbled 55.2% over the course of the year. So far in 2009, the sector has begun to regain its footing. After a rocky start, financials are now approaching break-even. Year-to-date, here are the top five financial stocks with a market cap of at least $10 billion.
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Shunning a Bailout
The top performer in this class of stocks has been Barclays (NYSE: BCS) with a year-to-date return of 80%. In an effort to shore up its balance sheet, the company recently agreed to sell its Barclays Global Investors (BGI) business unit to BlackRock (NYSE: BLK) for $13.5 billion. BGI includes Barclays' much sought after iShares asset management business. Earlier in the year, Barclays exhibited a sign of strength when it declined to receive government bailout funds in the wake of the global credit crunch. The bank was able to overcome steep write-offs during its Q1 thanks to incremental revenue that was generated as the result of its purchase of Lehman Brothers' U.S. assets.
Repaying Uncle Sam
The second-best performing financial stock with a market cap above $10 billion as we approach the midway point of 2009 is Morgan Stanley (NYSE: MS). After losing two-thirds of its market value in 2008, the bank holding company has been able to steady its ship in 2009. Shares of Morgan Stanley are up 75% so far this year. The horizon looks even more promising for shareholders as the company was recently approved to repay its TARP money which has come to be viewed as a scarlet letter in the industry. Another bank that was also approved to repay its bailout money along with Morgan Stanley is Goldman Sachs (NYSE: GS). Common shares of Goldman Sachs have risen 70% year-to-date. In mid-April, the firm checked in with a strong Q1 and was able to take advantage of its rising stock price by making a $5 billion common equity offering.
Hitting Their Stride
Denmark-based Danske Bank (OTC: DNSKY.PK) turned in a mixed bag of results in its most recent quarter. The firm reported record Q1 income as it benefitted from strong banking activities. The gains were partially offset by a large amount of loan impairment charges. Nevertheless, the company has seen its stock appreciate 67% so far this year, making it the fourth-best performing stock in this group. (For more, read Impairment Charges: The Good, The Bad And The Ugly.)
Switching focus to the other side of the pond, CME Group (NYSE: CME) has surged 58% up the charts in 2009. The futures and options products company is bouncing back from a tough Q1 in which pro forma diluted EPS was down 30% on a 21% drop in total revenue when compared to its year-ago quarter. On the plus side, the company has been able to maintain relative strong margins while operating in a brutal macro environment.
The Bottom Line
Coming off of a horrendous 2008, the financial sector has been starting to work its way back towards a state of normality. Some of last year's biggest losers have been among the biggest winners in the space as we approach half-time. We will revisit this race at the end of 2009 to see which companies were able to pull through and which companies ultimately could not keep pace. (To learn more, read Analyzing A Bank's Financial Statements.)