FIG (Banks & Insurance)
Two banks both trade on tangible book: one at 0.6x, one at 2.0x. What explains the gap?
Model answer
The first-order answer is the ROTE-versus-COE spread: the 2.0x bank is earning well above its cost of equity, the 0.6x bank well below — a regression of P/TBV on ROTE explains most of the…
The full, human-reviewed answer is in the bank.
Sign up free and Daily 10 serves you 10 questions a day from all 1,500+ — or go Pro for unlimited reps.
More from FIG (Banks & Insurance)
- Why is EV/EBITDA a meaningless multiple for a bank?
- Why does a standard unlevered DCF fail when you point it at a bank?
- Why do bankers value financial institutions on equity value only, never enterprise value?
- What does it mean when people say 'debt is raw material, not capital structure' for a bank?
- Why are capex and working capital effectively undefined concepts for a bank?
- Why is interest expense an operating item for a bank when it's a financing item everywhere else?