The Bank Stock With the Best Return on Equity in its Sector

While metrics like revenue, net income, and earnings per share are important indicators of a stock's performance, it is also critical to look at return on equity (ROE) -- especially for banks.

ROE is a measure of how much profit, or net income, a bank makes from shareholder equity, or investments in its stock. Why is this important, particularly for banks? Banks have strict, mandated liquidity requirements, meaning they have to maintain a certain level of liquidity, a capital buffer, to withstand an economic shock. They must be able to accommodate their customers should they withdraw money en masse.

ROE measures how efficiently a bank uses shareholder equity to make money; it shows that it can make money from the equity invested in it. This is important because banks may not have the same leeway as other companies to invest or spend their way to profits because of that capital buffer.

So, when examining bank stocks, always look for their ROE. Which large bank has the highest ROE? JPMorgan Chase (NYSE: JPM).

Image source: Getty Images.

JPMorgan Chase leads the way

JPMorgan Chase has long carried the mantle as the best large bank in the country by just about any metric over the long term, including ROE. According to the Federal Deposit Insurance Corp. (FDIC), the average ROE for all banks as of Dec. 31, 2025, the latest data available, was 11.82%.

JPMorgan Chase, the nation's largest bank, had the highest ROE among the top 25 largest banks at 15%. That means JPMorgan Chase generated a 15% net income (its return) on the equity shareholders invested in the stock.

Banks, particularly JPMorgan Chase, also tout their return on tangible common equity (ROTCE). The ROTCE looks at the return on hard, physical assets and eliminates some accounting quirks (or intangible assets), like goodwill from past acquisitions. It is considered a more accurate depiction of a bank's success in generating returns from equity.

In the latest quarter, JPMorgan Chase had an ROTCE of 18%.

The consistently high ROE and ROTCE have helped JPMorgan Chase stock outperform over the years. Over the past five years, the stock has posted an average annualized return of 14.1%, second only to Wells Fargo's 15.3%. Over the past 10 years, JPMorgan Chase has had the best average annualized return among its peers at 17.5%.

Right now, JPMorgan Chase stock is down about 8% year to date, but it is reasonably valued at roughly 13 times earnings. JPMorgan Chase reports first-quarter earnings on Tuesday, April 14, so watch out for that ROE.

Wells Fargo is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.