Citigroup finally released their 10-K this past weekend allowing me to compare the asset quality of the four large banks in the US. I always like to see what percentage of the assets are the so call "marked to fantasy" assets. These assets, also called Level 3 Assets, are valued by management WITHOUT any market comparables. Management basically values them at whatever they want so long as they can convince the auditors that the rationale is not unreasonable.
This year Bank of America takes top honors, while JPM comes in last. The rankings haven't changed much over the years other than BAC has overtaken WFC for top spot.
I am amazed at how quickly Brian Moynihan has cleaned up the books at BAC. Level 3 assets were around two and half times the current amount only two years ago. Today, even if you discount the book value by the $32 billion of mark to fantasy assets, you can still buy the company at an $11 billion dollar discount. I can't resist a bargain.
I have commented on balance sheet of JPM in the past. In particular, I noted before the London Whale incident that you could drive a truck through their balance sheet (Read Here: Bank of America & Europe). Then after the losses from the incident were exposed, I couldn't resist and bought a whole bunch of JPM (Read Here: Why JPM Is Cheap).
As I read the annual reports of the various banks I found the disclosure this year is better than ever. The US financials have never been in better shape. They are soundly capitalized and the quality of the assets have never been better.
The results of the stress tests can't come soon enough.
Disclosure: Long WFC, BAC Class A warrants and JPM warrants