![]() They offer similar products to both individual and corporate clients. 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. ![]()
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