With the latest stock market sell-off taking both the Dow Jones Industrial Average and the S&P 500 Index to formal correction territory of -10% or more, many investors are at a crossroads. Some investors want to run for cover, but others want to find bargains. It turns out that the latest round of market selling took more big banks back under their respective book values — a point that acts as a homing beacon for value investors.
One thing that investors should keep in mind is that there are always (or almost always) some banks and financial services stocks that trade at discounts to their stated book value. Some of them do not list their tangible book value, and some trade at discounts to the stated book value but would be at discounts to the tangible book values.
24/7 Wall St. wanted to pick through the bargain bin for value investors. This is certainly not an “all clear sign” and no investor should ever assume that an absolute bottom has been put in. Another consideration that value investors have to keep in mind is that if a stock trades at a discount to book value, there is generally a reason for that.
It may be no surprise for many investors that Bank of America and Citigroup are at discounts to their book value. After all, they were at discounts before the sell-off. What has happened in the latest sell-off is that investors can now focus on larger banks with market caps in excess of $5 billion that are at a discount to book value.
Regions Financial remains in this category, as does Zions Bancorp. Still, the selling was broad enough and hard enough that Comerica and SunTrust Banks dipped back under their stated book values again. Another consideration is that most of these banks should see a continued growth to that book value through time.
24/7 Wall St. has decided to run a brief analysis and show financial data on each of these banks. Included are the market capitalizations and the current share price versus book value per share. Additional color on dividends, analyst upside, trading ranges and a description of each also has been included.
Bank of America
Bank of America Corp. (NYSE: BAC) has a massive $167 billion market cap, and the $16.05 share price compares to book value per share of $21.91 stated. The share price is even barely above its $15.02 tangible book value per share.
The stock has a consensus analyst price target of $19.26 and has seen several analyst upgrades of late, based on the same observations. It has a 52-week trading range of $14.60 to $18.48, a yield of about 1.2% and a chance that the Federal Reserve will allow for a higher dividend on top of the stock buyback plan it has underway.
Citigroup Inc. (NYSE: C) is valued near $52.50 and is up handily from the sell-off lows, but its market cap is still $158 billion. Citi still has too many foreign operations and segments that may be sold off ahead to adequately count, but this price is now down about $6.00 from the last time we valued it against book value. Its book values per share were $68.28 on a stated basis and $59.18 on a tangible basis, as of June 30.
Citigroup has a 52-week trading range of $46.60 to $60.95, and its consensus analyst price target actually has ticked up to $65.96. Its dividend is a puny 0.4% yield, but it is going to be free to boost its dividend, most likely.
Comerica Inc. (NYSE: CMA) was last seen up 1.6% at $41.51, and it has a 52-week range of $40.09 to $53.45. It screened out as being only 0.98 times book value, so it is only the sell-off that took it back under book value. Its market cap is $7.4 billion, and its dividend yield is just under 2%.
Comerica’s screen was based on a FINVIZ screen, as the bank does not report book value in the same manner as other key banks. Still, it is growing its average loan balance, its deposits and its revenue, all in the single digits. Comerica also specifically stated that its balance sheet is well positioned to benefit as rates rise, and it used almost $100 million to buy back stock last quarter.
Regions Financial Corp. (NYSE: RF) was last seen trading around $9.20, and the market cap is just over $12 billion. Regions now screens out as trading at only 0.75 times its stated book value, and the stock’s sell-off has its shares trading less than $1 above its tangible book value of $8.37 per share.
Regions recently showed that its growth is back, and it has no real emerging market or Asian exposure as its network is roughly 2,000 ATMs and nearly 1,700 banking offices in the following states: Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, South Carolina, Tennessee, Texas and Virginia. Its stock has a 52-week range of $8.59 to $10.87, a consensus price target of $11.38 and a dividend yield of 2.5%.
SunTrust Banks Inc. (NYSE: STI) was last seen up 2% at $39.05, and a FINVIZ screen showed this as being 0.92 times book value. The stock has a 52-week range of $33.97 to $45.84 and a market cap of $20 billion. Note that the high in this bank’s stock was from mid-July. The stated book value per share was $42.46, while its tangible book value per share was lower at $30.65, but both rose again sequentially.
SunTrust has a 2.4% dividend yield, and the only reason it made this list of discounts to the stated book value is because of recent selling pressure. Analysts also have a consensus price target of $47.08 here.
As of the end of 2014, SunTrust’s network had 1,445 full-service banking offices in Florida, Georgia, Maryland, North Carolina, South Carolina, Tennessee, Virginia and the District of Columbia. Still, it has many additional services such as wealth management, investment banking and other efforts that make it seem more full-service than many other regional banks.
Zions Bancorp. (NASDAQ: ZION) was trading at $31.00 during a prior book value review before the sell-off, and shares were last seen at $27.50, with a $5.6 billion market cap. Its stated book value per common share was $32.03, and it is now barely above its tangible book value per common share of $26.95. Zions has a 52-week range of $23.72 to $33.03 and a consensus price target of $34.71.
The dividend yield is 0.9%, due to the bank having more restrictions than others. Zions has well over 400 bank locations throughout Arizona, California, Colorado, Idaho, Nevada, New Mexico, Oregon, Texas, Utah, Washington and Wyoming. Its deposits were almost $49 billion at the end of June. It also sold the remaining portfolio of its collateralized debt obligations in the second quarter and took a one-time pretax loss of approximately $137 million.
Before you think that the bank will only grow in book value, Zions was one of the banks that formally stated that the effects of the energy price decline are not yet fully manifested.