These Were the 3 Top-Performing Large U.S. Bank Stocks in 2022

The banking sector struggled in 2022, as investment banking revenue fell significantly, and investors repositioned their portfolios to prepare for what could be a difficult year and lower earnings in 2023. Investors are concerned about fast-rising deposit costs, narrowing margins, and the normalization of credit.

Large bank stocks got hit hard, with the KBW Nasdaq Bank Index down close to 26% this year, underperforming the broader market. Still, a few large bank stocks fell only slightly and widely outperformed the broader market. Here are three of the top-performing large U.S. bank stocks in 2022.

1. Charles Schwab

The diversified financial services company Charles Schwab (SCHW 0.73%) has really been an industry darling since the pandemic started, with its stock up close to 75% in those few years. Schwab completed a big acquisition of TD Ameritrade in late 2020 to add significant scale to its investor services division.

In 2022, Schwab’s stock declined only by about 4%, as the bank has significantly grown net interest revenue, which is the money made on interest-earning assets after funding those assets.

While all banks are growing this revenue thanks to higher interest rates, Schwab does this without taking a lot of credit risk on its balance sheet. Loans only make up about 7% of total interest-earning assets.

With the market outlook quite cloudy for 2023, it’s a little difficult to forecast how Schwab will perform because a down market could hurt client flows in its asset management business, while trading revenue is always difficult to predict. But the company should continue to benefit from rising interest rates, and I definitely think it’s well positioned long term.

2. Ameriprise Financial

The asset management and retirement solutions bank Ameriprise Financial (AMP -0.30%) has put up a great performance this year and is up about 1.4%. The stock has also served investors very well since the pandemic.

Similar to Charles Schwab — although to even more of an extent — Ameriprise doesn’t do lending and, therefore, has no credit risk on its balance sheet. The company makes 60% of its revenue from advice and wealth management, 19% from asset management, and 21% from retirement and protection solutions, which is benefiting from baby boomers entering retirement and millennials and Gen-Xers planning for it.

In the third quarter of 2022, adjusted earnings rose 9% year over year, and the company continues to generate strong returns on equity (excluding unrealized losses) of more than 47%. Again, the outlook heading into 2023 remains cloudy for asset and wealth managers, but Ameriprise certainly has a solid fundamental business.

3. Regions Financial

The nearly $158 billion asset Regions Financial (RF -0.28%) is really the only large traditional lender on this list. The stock is only down about 5% this year, which is a win compared to the broader market and banking sector.

Regions has developed a solid deposit base and still has about 40% of its total deposits in non-interest-bearing deposits, meaning the bank pays no interest on them. Furthermore, the bank said in the third quarter that it does not expect to have to raise any more higher-cost wholesale deposits in the near term, even as deposits are becoming more expensive and competitive.

Regions also has a large business and commercial lending portfolio, most of which should have variable rates and reprice as the Federal Reserve raises interest rates, allowing the bank to grow its margins.

But management also runs a robust hedging program, allowing it to position the bank for various environments, whether interest rates rise or fall next year. The stock is quite expensive at this point, trading at close to 300% of its tangible book value, or net worth. But analysts are still bullish, and investors seem to like that the bank is positioned for a variety of scenarios.