Three Mega U.S. Banks Gaining Altitude

Earnings season is just kicking off, and it appears the market is happy with what it sees. The broader equity indices, as measured by the SPDR S&P 500 ETF (NYSE:SPY), are up significantly on the week, tacking on roughly 7% over the last five trading sessions. But the big banks are outperforming. (To learn more, see How To Outperform The Market.) Could it be that the next leg up of the bull market is now beginning? After the last three months of down action, investors could use a little good news. And if the financials have to participate in any climb - as most analysts agree - then maybe the long sought after reprieve is finally here. And maybe the dreaded double-dip recession has been dodged.

Here are three of the largest American financial institutions, each of whom is scheduled to report earnings this week, and each of whom has been flying in the last few days.

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Red, White and Blue - but not in the Black
Bank of America Corporation (NYSE:BAC) is scheduled to deliver earnings on Friday and already the stock is rising. In the last five trading days, BAC stock is up almost 12%. Over the last year, the shares are up more than 20%, slightly trailing the Financial Select Sector SPDR ETF (NYSE:XLF), which has risen by over 25% in the last 12 months.

Bank of America stock has been paying a quarterly dividend of 1 cent for the last few quarters, and has yet to post positive annual earnings (hence no P/E ratio) since the crisis of 2008. The company is also battling charges that it intentionally deceived investors by failing to disclose billions of dollars worth of debt, erroneously deeming them 'sales' instead of 'borrowings'. For its part, the company claims the entries were a simple bookkeeping mistake.

Chasing Profits
Shares of JPMorgan Chase & Co. (NYSE:JPM) climbed 13% in the last week's trade and now change hands for 15.7-times last year's earnings. For the latest 12 months, the stock is up 25%. JPM shares also sport a very competitive Price/Book ratio at a mere 1.03. A full 75% of the company's shares are institutionally owned.

Citigroup, Inc. (NYSE:C) will report earnings Friday and approach its announcement with an equally impressive run. For the last five trading days, Citigroup stock is up almost 13.5%. For the year, the shares are trading 66% higher.

The Bottom Line
If the financials continue to move, it will likely be on the backs of the three banks outlined above. And if that happens, the broad market, too, should continue to rally strongly.

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