BAC-PM
Bank of America Corporation
$21.52
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 55.4% below fair value
You pay
$21.52
Bear
$33.81
Fair
$48.30
Bull
$62.79
Bear
$33.81
+57.1%
ROTCE 9.8% → 0.82x TBV
Fair
$48.30
+124.4%
ROTCE 13.0% → 1.29x TBV
Bull
$62.79
+191.8%
ROTCE 15.0% → 1.57x TBV
Key Value Driver
ROTCE (13.0%) vs. cost of equity (11.0%)
Implied Market Multiple
0.65x
Summary
With ROTCE of 13.0% vs. 11.0% cost of equity, fair P/TBV is 1.29x on $33.00 tangible book, implying $48.30 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