By Michael Miller

The financial crisis has hit the banking industry hard. The market values of the top 20 banks in the world have dropped significantly. The biggest losers, of course, are those banks that were heavily involved in mortgage backed securities--American lenders like Citigroup and Bank of America.Over the past year, Bank of America has lost more than 40 percent of its market value. A number of European banks have also suffered from subprime lending. UBS, a Zurich-based bank heavily invested in securities, just received an $8 billion bail out from the Swiss government. Its market value has plummeted more than 56 percent since this time last year. In comparison, Credit Suisse, another Swiss bank much less reliant on derivatives trading, is in much better shape, opting for a private capital infusion.

Yet while some institutions are now shadows of their former selves, others may eventually emerge stronger than ever. Chinese banks, for instance, have emerged from the crisis in pole position. Despite sizable losses of their own, China’s big three banks are flush with funds and have unmatched market-to-book ratios—an indicator of market strength. This newfound swagger has already led the Industrial and Commercial Bank of China (ICBC) to open a branch in New York City, a powerful symbolic gesture. That said, even Chinese banks could be hiding serious problems. In the past, China’s banking industry was plagued by bad loans made to state-owned enterprises. Whether these loans are still lurking under the surface somewhere is anyone’s guess.

The runaway winner in all of this is Wells Fargo. It alone among the world’s top 20 banks has seen its market value rise—an almost unreal 10.5 percent—over the past year. Not only did it beat out Citigroup to scoop up Wachovia, but also it had to be forced into accepting Congress’s bailout package. “Wells Fargo is generally considered the best run of the major banks,” says Beim, an impression reinforced by its handling of the past few months. Coming in second is HSBC, the only major British bank to avoid PM Gordon Brown’s capital infusion plan, with another American bank, US Bancorp (USB) a close third. Both HSBC and USB have managed to keep leverage low while generating high return on assets.