Key insights
- The author notes that bank stocks, including Citigroup and Capital One, are trading above book value despite relatively low returns on assets (ROA). This deviation from historical valuation norms suggests market expectations of increasing interest rate spreads or improved profitability for these institutions, potentially signaling a bullish outlook for the banking sector and, to a lesser extent, the broader market.
Every now and then I go and check how bank stocks are valued. As a general rule, what I usually see is that banks that earn more than 1% on their assets sell at between 1 and 2 times their book value, and banks that earn less than 1% on their assets sell at less than their book value.
I checked again today, and almost everything is selling over their book value. Even Citigroup and Capital One that earns 0.54% and 0.37% on their assets is selling for more than its book value.
Is there a reason for this? Are we expecting their interest spreads to increase for some reason?
|Ticker|Total Assets|ROA|P/B|ROE|Latest Filing | |:-|:-|:-|:-|:-|:-| |JPM|$4.42T|1.29%|2.48|15.74%|2025-12-31| |BAC|$3.41T|0.89%|1.37|10.06%|2025-12-31| |C|$2.66T|0.54%|1.01|6.74%|2025-12-31| |WFC|$2.15T|0.99%|1.67|11.78%|2025-12-31| |GS|$1.81T|0.92%|1.92|13.40%|2025-09-30| |MS|$1.42T|1.19%|2.53|15.10%|2025-12-31| |USB|$695.4B|1.03%|1.19|11.35%|2025-09-30| |COF|$669.0B|0.37%|1.37|2.16%|2025-12-31| |PNC|$568.8B|0.22%|1.35|2.13%|2025-09-30|
I got the analysis from the Atlantis Data Solutions website.