By Billy Fisher
2008 is a year that the financial service sector would rather forget. The Financial Select Sector SPDR (NYSE: XLF) crumbled 55.2% over the course of the year. So far in 2009, the sector has begun to regain its footing. After a rocky start, financials are now approaching break-even. Year-to-date, here are the top five financial stocks with a market cap of at least $10 billion.
Shunning a Bailout
The top performer in this class of stocks has been Barclays (NYSE: BCS) with a year-to-date return of 80%. In an effort to shore up its balance sheet, the company recently agreed to sell its Barclays Global Investors (BGI) business unit to BlackRock (NYSE: BLK) for $13.5 billion. BGI includes Barclays' much sought after iShares asset management business. Earlier in the year, Barclays exhibited a sign of strength when it declined to receive government bailout funds in the wake of the global credit crunch. The bank was able to overcome steep write-offs during its Q1 thanks to incremental revenue that was generated as the result of its purchase of Lehman Brothers' U.S. assets.
Repaying Uncle Sam
The second-best performing financial stock with a market cap above $10 billion as we approach the midway point of 2009 is Morgan Stanley (NYSE: MS). After losing two-thirds of its market value in 2008, the bank holding company has been able to steady its ship in 2009. Shares of Morgan Stanley are up 75% so far this year. The horizon looks even more promising for shareholders as the company was recently approved to repay its TARP money which has come to be viewed as a scarlet letter in the industry. Another bank that was also approved to repay its bailout money along with Morgan Stanley is Goldman Sachs (NYSE: GS). Common shares of Goldman Sachs have risen 70% year-to-date. In mid-April, the firm checked in with a strong Q1 and was able to take advantage of its rising stock price by making a $5 billion common equity offering.
Hitting Their Stride
Denmark-based Danske Bank (OTC: DNSKY.PK) turned in a mixed bag of results in its most recent quarter. The firm reported record Q1 income as it benefitted from strong banking activities. The gains were partially offset by a large amount of loan impairment charges. Nevertheless, the company has seen its stock appreciate 67% so far this year, making it the fourth-best performing stock in this group.
Switching focus to the other side of the pond, CME Group (NYSE: CME) has surged 58% up the charts in 2009. The futures and options products company is bouncing back from a tough Q1 in which pro forma diluted EPS was down 30% on a 21% drop in total revenue when compared to its year-ago quarter. On the plus side, the company has been able to maintain relative strong margins while operating in a brutal macro environment.
The Bottom Line
Coming off of a horrendous 2008, the financial sector has been starting to work its way back towards a state of normality. Some of last year's biggest losers have been among the biggest winners in the space as we approach half-time. We will revisit this race at the end of 2009 to see which companies were able to pull through and which companies ultimately could not keep pace.