TOWN
TowneBank
$34.63
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Mild
·
Conviction
Overvalued
Trading 14.2% above fair value
You pay
$34.63
Bear
$17.51
Fair
$30.33
Bull
$38.03
Bear
$17.51
-49.4%
ROTCE 7.3% → 0.77x TBV
Fair
$30.33
-12.4%
ROTCE 9.8% → 1.34x TBV
Bull
$38.03
+9.8%
ROTCE 11.3% → 1.68x TBV
Key Value Driver
ROTCE (9.8%) vs. cost of equity (8.3%)
Implied Market Multiple
1.53x
Summary
With ROTCE of 9.8% vs. 8.3% cost of equity, fair P/TBV is 1.34x on $22.66 tangible book, implying $30.33 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