The wreckage of the financial crisis led to pages upon pages of financial reform aimed at ending the era of Too Big To Fail, but six years after the banking system blew up the five biggest firms control 44% of the $15.3 trillion in assets held by U.S. banks according to data compiled by SNL Financial. Those banks --
JPMorgan holds just over $2 trillion in assets, or 13.1% of the industry's total, followed by BofA at $1.5 trillion (9.9%), Wells Fargo just under $1.5 trillion (9.7%) and Citi at $1.4 trillion (9%), before a substantial dropoff to US Bank at $387 billion (2.5%).
SNL's analysis, which considered only commercial banks, notes the drastic increase in banking industry concentration over the past few decades. In 1990, the five biggest U.S. banks held less than 10% of industry assets, but that figure has steadily marched higher ever since, pausing only for the year from 1999 to 2000. Today, Wells Fargo, the third biggest bank, controls basically the same percentage of assets the entire top five did in 1990.
That increased concentration is largely thanks to banking industry consolidation that accelerated in the 1990s then hit overdrive after Sandy Weill's controversial deal to create the modern Citigroup prompted the repeal of Glass-Steagall, the legislation that forced a separation of church and state between commercial and investment banks.
In 1990, Citibank was the largest bank by assets, followed by Bank of America and Chase Manhattan. But it isn't hard to see how JPMorgan leaped to first place over the past 24 years: Chase merged with the two banks behind it in 1990, Morgan Guaranty Trust Company of New York and Manufacturers Hanover Trust Company.
The next round of financial industry consolidation likely won't be driven by the Too Big To Fail crowd though. The Federal Reserve has established rules taking effective in 2015 that will prohibit mergers that result in a combined company's liabilities exceeding 10% of the industry's total. As a result, dealmaking is more likely among the second-tier and regional banks, and SNL points to BB&T's recent takeover of Susquehanna as a transaction more illustrative of industry trends.
That may bode well for the new acquirers though. For the stretch leading up to the financial crisis there appeared to be a real benefit to the swelling asset bases of the biggest banks. SNL notes that the average return on assets for the group beat competitors from 1999 to 2006, peaking at 1.4% in 2004 to a median of 1% for the industry. That gap has shrunk since 2006 though, with the five biggest banks delivering a return on assets of 0.9% to the industry median of 0.85% for the first nine months of 2014.
Each of the five largest banks by assets has enjoyed a rising stock price in 2014, but Wells Fargo has easily led the pack with a 20% climb.