Banking, finance, and taxes

12 Large Financial Institutions Trading Under Book Value in August

Jon C. Ogg

Published: August 23, 2017 12:00 pm

Last Updated: January 12, 2020 8:52 am

With the stock market having hit all-time highs almost monthly in 2017, and with this bull market eight-and-a-half years old, investors are routinely hearing that the stock market is expensive. The problem in calling the whole market expensive is that this a market full of many stocks and full of multiple sectors from which investors can pick and choose. It turns out that some parts of the market actually still look cheap in August of 2017.

Value investors often look for companies trading below their book value, and one sector that has continued to offer stock prices under their book value is the financial sector. This includes money center banks, regional banks and insurance companies.

Investors need to consider one issue about “value” when it comes to value investing. This is where beauty is solely in the eye of the beholder, and if a stock is considered “cheap” it is often cheap for a reason.

Companies tied to business development or that were foreign based with American depositary shares were excluded from this review to avoid unknown and perhaps circumstantial issues. The minimum size of the financial institutions screened were listed as having market capitalizations north of $2 billion, they had to trade over 100,000 shares per day for liquidity purposes, and they had to be paying a dividend to show that they had that minimum financial health metric. Each group also had to be profitable.

Please note that some of these stocks are only under book value to an August sell-off or due to other selling pressure in prior months. Some are also fighting over the systemically important financial institution (SIFI) status, which also means “too big to fail.” Again, “cheap” stocks often look cheap for a reason.

The book value screens came from Finviz.com and from second-quarter earnings press releases. We have included trading data, corporate data, consensus analyst price targets and future valuations from Thomson Reuters, dividend yields and market caps. Please note that some dividend yields are the “current yields” rather than dividends that have been approved by the Federal Reserve but that have yet to be paid to shareholders. After all, anything can change until it formally takes place!

Here are 12 mid-cap and large-cap financial sector stocks trading under the current stated book value as of August 2017.

Ally Financial

Ally Financial Inc. (NYSE: ALLY) is valued at 0.75 times its stated book value. The company announced recently that the Federal Reserve has released its Ally Bank from the capital, liquidity and business plan commitments that had been made in connection with its application for membership in the Federal Reserve System. This includes the commitment to maintain a Tier 1 leverage ratio of at least 15%. The company further noted that Ally Bank may now manage its capital and liquidity subject to applicable regulatory requirements and is expected to distribute a dividend of approximately $2.9 billion to Ally Financial during the third quarter of 2017.

Ally Financial recently traded at $22.06 and has a 52-week trading range of $16.68 to $23.62. Its consensus analyst target price is $25.91, and its market cap is $9.9 billion.

AIG

American International Group, Inc. (NYSE: AIG) is valued at 0.77 times book value, and unlike some of the other financial players it has been in state of flux and reorganization since the Great Recession. Its core business focuses on insurance products for commercial, institutional and individual customers, and the AIG name is widely recognized around the world. Its dividend yield is over 2%.

AIG was last seen at $61.22 and has a 52-week range of $57.35 to $67.47. Its consensus target price is $70.00, and its market cap is $55.3 billion.

Capital One

Capital One Financial Corp. (NYSE: COF) is valued at 0.80 times book value, and the credit card issuer has had a hard time with some of its internal metrics, along with other companies seeing some soft internals on credit card payment metrics. That has depressed Capital One’s market valuations, and its dividend yield is close to 2%. All risks aside, this is still considered to be a well-managed credit card issuer, and while it has raised rewards, the bank holding company hasn’t gone as “rewards crazy” as other credit card issuers.

Capital One traded at $81.44, in a 52-week range of $68.27 to $96.92. Its consensus target price is $95.57, and its market cap is $39.4 billion.

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Citizens Financial

Citizens Financial Group Inc. (NYSE: CFG) is valued at 0.85 times book value, and the stock was last seen trading down more than 15% from its 52-week high, despite beating earnings expectations in July. This is the holding company for Citizens Bank, and Citizens Bank of Pennsylvania for retail and commercial banking products and services in the eastern and midwestern United States. Its dividend yield is about 2.2%.

Citizens Financial traded at $33.42, in a 52-week range of $23.37 to $39.75. Its consensus analyst target is $38.96. The market cap is $16.7 billion.

Leucadia: The Mini-Buffett Stock

Leucadia International Corp. (NYSE: LUK) screens out as being valued at 0.84 times book value. There was a debate on including this “miniature Berkshire Hathaway” due to real estate, car and motorcycle leases and dealerships, food, and oil and gas. Still, Leucadia owns the well-known Jefferies investment banking firm and this makes up a large part of its $8.6 billion market cap. Its dividend yield is about 1.6%.

Leucadia was last seen at $24.00 and has a 52-week range of $17.87 to $27.34. Its consensus target price is $30.00.

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Citigroup

Citigroup Inc. (NYSE: C) is valued at just 0.87 times book value, the lowest valuation of all money center banks. The banking giant still has many international operations and arguably could still sell off more assets. That being said, Citi was recently given approval by the Federal Reserve to increase its capital return plan for shareholders by a larger amount than Wall Street was expecting. Its current dividend yield is 1.21%, but that will go to almost 2% when its 16-cent payout goes as high as 32 cents.

Citigroup traded at $66.85 and has a 52-week range of $45.16 to $69.86. Its consensus target price is $72.41, and its market cap is $182.1 billion.

Prudential

Prudential Financial Inc. (NYSE: PRU) is valued at 0.90 times book value, and the insurer’s stock is still about 15% under its 52-week high. It comes with nearly a 3% dividend yield, and its stock has doubled in the past five years. The provider of life insurance, annuities, investment management and other financial products is also said to be trying to get out from under its “too big to fail” (SIFI) status as well. With a $43 billion market cap, it may seem like it is not too big to fail, but it dates back to the 1800s. As of 2017 it had $3.7 trillion worth of life insurance in force and over $1.3 trillion in assets under management.

Prudential traded at $101.90, in a 52-week range of $76.37 to $115.26. Its consensus target price is $115.46. Its market cap is $43.5 billion.

NYCB

New York Community Bancorp Inc. (NYSE: NYCB) is valued at 0.94 times book value, and the bank now has about $48 billion in assets. The bank specified a continuing desire to manage its balance sheet below the current $50 billion SIFI threshold. The bank also has exposure to New York City taxi medallion loans, but its latest 17-cent dividend would imply a 5.7% yield that feels too high for a regional bank. It has also been hitting 52-week lows and is now down more than 30% from its 52-week high.

The shares were last seen at $11.96, in a 52-week range of $11.86 to $17.68. The consensus target price is $13.48, and the market cap is $5.9 billion.

Lincoln National

Lincoln National Corp. (NYSE: LNC) is valued at 0.95 times book value, and the life insurance company has seen its shares sell off by more than 10% in the past month alone. Its dividend yield is currently just about 1.7%, and it is valued at less than nine times next year’s expected earnings.

Lincoln National traded at $67.84 and has a 52-week range of $44.74 to $75.78. Its consensus target price is $78.27, and its market cap is $15.0 billion.

Bank of America

Bank of America Corp. (NYSE: BAC) has more or less remained under book value along with Citi in the money center banks. It is valued at 0.95 times book value, and its dividend yield is currently about 2.0%. With a $234 billion market cap, each basis point under book value represents $2.3 billion in discounting. Bank of America has remained under the Fed’s nose for a while longer than JPMorgan and Wells Fargo, and that has been why it has been at a relative discount.

Bank of America traded at $23.83. It has a 52-week range of $14.81 to $25.80 and a consensus target price of $27.00.

Umpqua

Umpqua Holdings Corp. (NASDAQ: UMPQ) is valued at 0.96 times book value and it is only under book value due to the sell-off seen in August. This is the parent company of Umpqua Bank, an Oregon-based community bank with more than $25 billion in total assets and almost $23.5 billion in tangible assets. Its market value of $3.8 billion comes with a 3.7% yield. Its shares are also down more than 10% from its 52-week high.

Umpqua was last seen at $17.30, and it has a 52-week range of $14.78 to $19.50. The consensus target price is $19.68.

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FNB

FNB Corp. (NYSE: FNB) is valued at 0.97 times book value, but that discount is only because its shares are down 22% from its 52-week high and it was a $16 stock back in March. Its stated book value discount is also a bit different than some other regional banks because it is valued at more than twice tangible book value. The bank’s average loans of $20.4 billion were up $4.2 billion (by over 25%), and the average deposits of $21.2 billion were up $4 billion (about 23.5%) due to its acquired Yadkin balances and organic loan growth. While this screens out as a regional bank with total assets of $31 billion with over 400 regional bank offices, FNB also has wealth management services for asset management, private banking and insurance. FNB has a yield of about 3.7%.

Its shares traded at $12.89, in a 52-week range of $11.86 to $16.43. Its consensus target price is $16.78, and its market cap is $4.2 billion.