The banking sector has by and large traded at a discount to its stated book value for quite some time. Many banks are still trading under their tangible book value, meaning that the banks could in theory liquidate their physical assets before any intangible and intellectual property assets and turn an instant profit. Now that we have seen the major banking earnings reports, we are taking a look at each.
Bank of America Corp. (NYSE: BAC) and Citigroup Inc. (NYSE: C) are both selling off after earnings. BofA was the best performing DJIA stock and Citi remains under a new management restructuring effort after Vikram Pandit’s firing. Here is how their book value compares to share prices off of the 52-week low:
Bank of America shares are down 3.5% at $11.36, but that is up 69% from its 52-week low. The new book value is said to $20.24 per share on a stated basis and $13.26 on a tangible book value per share basis. Analysts have a consensus price target of $11.98 for BofA’s common stock, and its 52-week range is $6.72 to $12.20.
Citigroup Inc. (NYSE: C) is down 3% at $41.20, after the news, but this is up 67% from its 52-week low. Citi’s stated book value was $61.57 per share, and the tangible book value per share was listed as $51.19. Analysts have a consensus price target of $47.43 in Citigroup shares, against a 52-week raneg of $24.61 to $43.25.
We have seen other major bank earnings from the money-center banks as well:
Wells Fargo & Co. (NYSE: WFC) trades above its book value, as it is now the safest of the major money center banks. At $35.00 after earnings a week or so ago, its book value is listed as $27.74 per share. Analysts have a consensus price target of $38.91 in shares of Wells Fargo; its 52-week range is $28.77 to $36.60.
J.P. Morgan Chase & Co. (NYSE: JPM) is still extremely safe for the money center banks, but it has lost its pole position status due to the revelations about the London Whale and to ongoing trading exposure that Wells Fargo has a lot less of. J.P. Morgan’s stock is at $46.35 and up 50% from its year low. At its earnings, its new listed book value was $51.27 per share and its tangible book value was $38.75 per share. Analysts have a consensus price target of $50.21 in the shares, and its 52-week range is $30.83 to $46.83.
U.S. Bancorp (NYSE: USB) trades well above its book value due to its strength and lack of many of the Wall St. woes that got the banks into trouble. At $33.05, it is up 20% from its 52-week low. It reported in earnings that its book value per common share was $18.31. Analysts have a consensus price target of $36.98 in shares of U.S. Bancorp, against a 52-week range of $27.30 to $35.46.
Any lack of comparison to tangible book value over stated book value is because some of the earnings reports do not include both measurements of book value.
The big question is whether 2013 will be the year that banks get to rise back above their stated book values and/or their tangible book values again. That depends on the dividend allowances and share buyback allowances by regulators, and it depends on the economy.
The good news is that the banks have massively recovered to get more in-line with book values. The bad news is that after such a rally new investors are reluctant to get back in after the shenanigans they saw over the last decade.