FRBA
First Bank
$17.93
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Strong
·
Conviction
Undervalued
Trading 49.2% below fair value
You pay
$17.93
Bear
$21.51
Fair
$35.28
Bull
$43.54
Bear
$21.51
+20.0%
ROTCE 8.3% → 1.38x TBV
Fair
$35.28
+96.8%
ROTCE 11.1% → 2.26x TBV
Bull
$43.54
+142.8%
ROTCE 12.8% → 2.79x TBV
Adjust Assumptions
11.1%
7.2%
Key Value Driver
ROTCE (11.1%) vs. cost of equity (7.2%)
Implied Market Multiple
1.15x
Summary
With ROTCE of 11.1% vs. 7.2% cost of equity, fair P/TBV is 2.26x on $15.60 tangible book, implying $35.28 per share. DDM cross-check: $60.82.
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.
Dividend-based valuation: $60.82 (72% above our primary estimate). Large gaps suggest the dividend may not fully reflect the company's value.
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