BAC-PL
Bank of America Corporation
$1,283.38
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Overvalued
Trading 50.0% above fair value
You pay
$1,283.38
Bear
$546.79
Fair
$855.42
Bull
$1,040.60
Bear
$546.79
-57.4%
ROTCE 9.8% → 0.85x TBV
Fair
$855.42
-33.3%
ROTCE 13.0% → 1.33x TBV
Bull
$1,040.60
-18.9%
ROTCE 15.0% → 1.62x TBV
Key Value Driver
ROTCE (13.0%) vs. cost of equity (10.8%)
Implied Market Multiple
2.0x
Summary
With ROTCE of 13.0% vs. 10.8% cost of equity, fair P/TBV is 1.33x on $640.92 tangible book, implying $855.42 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