JP Morgan for example often delivers a high-teens return on tangible common equity and as such, is rewarded with a 2.0x or higher price to tangible book value.īOA and Citi are similar, in the sense, that they are universal banks. Thus a bank that is expected to consistently earn a 10 percent return on capital, should trade at 1.0x book. Banks in developed markets typically have a cost of capital of ~10 percent. Generally speaking, where a bank earns its cost of capital, it should trade at tangible book value. They are best valued on the basis of returns on tangible book value. The attractiveness of the business model Īll data and charts are sourced from Citi's and BOA's investor relation sections.I will consider several aspects including:
In this article, I will compare and contrast Citi and BOA and conclude, with reason, which is the better bank to buy at this point in the cycle. JP Morgan ( JPM) has always been my default and "safe" response but immediately noting that you also pay for quality.īank of America ( NYSE: BAC) and Citigroup ( NYSE: C), on the other hand, present their own enticing opportunity at times and for seemingly better value. One of the most common questions investors ask me is which large bank to buy.
0 kommentar(er)
