If you invested broadly in bank stocks over the past 20 years, then you pretty much went nowhere. You would have experienced a good run through 2007, followed by an enormous crash in 2008 and a recovery during the artificial bull run of 2009-2015. The good news is that dividends were collected along the way.

Instead of looking at the past 20 years, we'll take a look at individual bank stock performance over the past 10 years. This presented a much more challenging environment since it included the subprime mortgage crisis. The reasoning for only looking at the past decade is to see what bank stocks held up best during the worst of times. We’ll also take a look at which bank stocks have performed the best over the past year, as well as current dividend yields. The past year is important because the broader market has been slipping, and once again, we need to see which bank stocks offer the most resiliency. You can read all the articles you want and pay attention to analyst calls, but the bottom line is: Does this company/stock deliver for investors? If the stock is depreciating there is a reason for it, regardless of any bullish arguments. (For more, see: The Fuel That Fed the Subprime Meltdown.)

Energy Sector Impact

Prior to looking at the performance and yield numbers below, it’s important to realize that many unprofitable and overleveraged energy companies took out loans over the past several years. Who do you think made those loans? The banks. This doesn’t apply to all banks, but if one bank falters it will have a contagion-like impact on the sector.

The once-trusty Wells Fargo & Co. (WFC) has $17 billion in loans in the energy sector. Wells Fargo has set aside $1.2 billion in reserves in case the energy sector deteriorates further, which it likely will. The total bad loans made by JPMorgan Chase & Co. (JPM) to the energy sector is unknown. It has set aside $124 million to cover losses. That might not sound too bad, but JPMorgan warned that it could increase its reserves to cover bad energy loans from $124 million to $750 million if oil prices remain around $30 a barrel over the next 18 months. This is a likely scenario. Citigroup Inc. (C), which already stated that it expects continued pressure in the energy sector, has $300 million in reserves ready for a potentially doomsday energy scenario. This number could increase if oil prices move lower and Citigroup could be on the hook for at least $1.2 billion. (For more, see: Wells Fargo's 3 Key Financial Ratios.)

At this point, the above risks related to the three big banks mentioned above is nothing more than conjecture, but according to Standard & Poor's, 50% of energy junk bonds are distressed. This, by the way, is why I have owned and will continue to own ProShares Short High Yield (SJB). The failures in the energy space are likely to be small to mid-sized companies, though this will still have a negative impact on banks.

Let’s take a look at those performance numbers.

Performance

The chart below shows stock appreciation/depreciation over the past 10 and 1-year time frames as well as current dividend yields. Negative performance is in parentheses.

 

10-Year Performance

1-Year Performance

Dividend Yield

WFC

45.20%

(14%)

3.13%

JPM

34.20%

(4.33%)

3.05%

C

(92.03%)

(24.26%)

0.50%

BAC

(73.02%)

(24.97%)

1.54%

BBT

(19.85%)

(14.30%)

3.37%

FITB

(62.40%)

(21.09%)

3.39%

DFS

98.70%

(21.74%)

2.42%

HSBC

(62.41%)

(30.74%)

6.00%

STT

(12.06%)

(30.99%)

2.50%

USB

28.03%

(11.77%)

2.54%

COF

(23.05%)

(19.90%)

2.50%

PNC

21.45%

(8.93%)

2.44%

BK

(13.04%)

(15.15%)

1.97%

PYPL

N/A

(9.34%)

N/A

Not an intriguing list of potential stocks to own. Two of the best performers – WFC and JPM – will have to deal with bad loans at some point in the foreseeable future. That leaves PNC and USB as the best of the rest, but still not strong enough for investment consideration. PYPL is interesting as a fintech company that fits current consumer trends. It’s still not likely to appreciate in a deflationary bear market. It should, however, be kept on your watch list. (For more, see: The Top 5 Financials Stocks for 2016.)

The Bottom Line

What bank stocks should you own right now? None. That might sound harsh, but the objective is preserve capital while increasing net worth. Owning bank stocks in the current environment doesn’t appear to present an avenue toward achieving that goal. (For more, see: The World's Top 10 Banks.)

Dan Moskowitz is long SJB. He does not have any positions in any of the other stocks mentioned above.