BAC-PL
Bank of America Corporation
$1,196.00
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Overvalued
Trading 47.2% above fair value
You pay
$1,196.00
Bear
$519.44
Fair
$812.63
Bull
$988.55
Bear
$519.44
-56.6%
ROTCE 9.8% → 0.82x TBV
Fair
$812.63
-32.1%
ROTCE 13.0% → 1.29x TBV
Bull
$988.55
-17.3%
ROTCE 15.0% → 1.57x TBV
Key Value Driver
ROTCE (13.0%) vs. cost of equity (11.0%)
Implied Market Multiple
1.89x
Summary
With ROTCE of 13.0% vs. 11.0% cost of equity, fair P/TBV is 1.29x on $631.64 tangible book, implying $812.63 per share.
Warnings
Traditional cash flow models don't work well for banks — lending activity distorts how much cash the business actually generates.
Common valuation shortcuts don't apply here — for banks, interest payments are a core business cost, not overhead.
Key Risks
- Book value quality matters as much as level — check loan loss reserves
- Interest rate sensitivity creates non-linear earnings surprises
- Insurance reserving is actuarial, not financial — errors emerge slowly