Bank of America (BACFree Bank of America Stock Report) is a wonderful name. It attaches itself to the pride of a nation, proudly proclaiming to be THE bankUsing the VL Page_Business Disc for the United States. For many years it stood tall enough to live up to that not so subtle claim imbedded in its name.

Formed over the years through mergers, its current incarnation dates back to the marriage of Bank of America with NationsBank (a bank name with similarly grand aspirations) in the late 1990s. It also purchased mortgage-scandal-plagued Countrywide and investment bank Merrill Lynch in the late 2000s during the financial crisis. The logic in both cases was to pick up bargains, though neither has been a steal to date. (This information is contained in the Business Description.)

Indeed, the last two purchases seemed to drag the company into a deeper hole during the 2007-2009 recession and its aftermath (recessions are noted as the shaded gray areas on the Graph). The shares plummeted during the recession, recovered some and then traded lower again. After hitting a high in the mid-$50s in 2006, the shares now trade hands in the high single digits. (The high and low prices for a calendar year are shown above the Graph.) 

Bank analyst Theresa Brohpy’s Commentary, meanwhile, is not upbeat about the bank’s prospects. In fact, she notes that there isn’t much to look forward toUsing the VL Page_Analyst Comment over the next year or so, and has recently cut her earnings expectations for this year and next. She ended her recent regular quarterly report with “We’d stay on the sidelines for now.” Investors looking to bottom fish might find a compelling reason to own Bank of America, but anyone else would probably be better off passing.

Another option that is currently out of favor and facing some headwinds is JPMorgan Chase (JPMFree JPMorgan Chase Stock Report). This bank has been in the news of late because of a series of gaffs, most notably the company’s $4.4 billion trading loss attributed to the “London Whale.” Although results have been mixed, a fact that Brophy highlights in the Commentary section of her quarterly update on this company, JPMorgan Chase appears to be in better financial shape than Bank of America.

Using the VL Page_Quarterly Dividend BoxDividends are a particular point of differentiation. The government has held back weaker banks from increasing this shareholder disbursement—Bank of America still pays only a penny a share per quarter after trimming it to that symbolic level in 2009. JPMorgan Chase, however, started raising its dividend last year. It is now paying $0.30 per quarter, only eight cents below its level before the financial crisis. (Dividend information can be found in the Quarterly Dividend box.)

Investors looking to invest in a storied bank that is currently out of favor would probably be better served by an investment in JPMorgan Chase. Note that this bank earns an A Financial Strength Rating from Value Line while Bank of America gets a B (these scores can be found in the Ratings box of each report). Clearly, though, neither of these banks comes without a caveat—a less traditional choice might be in order for more conservative investors.

American Express (AXPFree American Express Stock Report) shares were hit hard by the recession, just like the other two banks. However, the niche financialUsing the VL Page_Historical Array services company weathered the storm much better than either Bank of American or JPMorgan Chase. It never cut its dividend and earnings recovered far more quickly. In fact, the shares are trading near the level they reached prior to the recession. (Earnings data can be found in the historical portion of the Statistical Array.)

One of the differentiating factors for American Express is its client base, which tends to be higher up on the socio-economic scale. While the other two banks have high earning clients, American Express’ client base, on average, are far wealthier. Moreover, its focus on superior customer service allows it to charge premium prices for its offerings—highlighted by the world renowned American Express Card franchise.

American Express is on sounder financial footing (it earns an A++ Financial Strength Rating) and possesses a fiercely loyal client base. These are attractive attributes in an industry that is still struggling. That said its three- to five-year appreciation potential isn’t as robust as either JPMorgan Chase or Bank of America, but that’s probably a small price to pay for a reduced level of risk. Investors of any temperament would likely be well served by owning American Express.

At the time of this articles writing, the author did not have positions in any of the companies mentioned.