TOWN
TowneBank
$35.80
Banks, Insurers & Asset Managers
85%
P/Tangible Book × ROE Quality
Mild
·
Conviction
Overvalued
Trading 13.4% above fair value
You pay
$35.80
Bear
$18.23
Fair
$31.58
Bull
$39.59
Bear
$18.23
-49.1%
ROTCE 7.3% → 0.80x TBV
Fair
$31.58
-11.8%
ROTCE 9.8% → 1.39x TBV
Bull
$39.59
+10.6%
ROTCE 11.3% → 1.75x TBV
Key Value Driver
ROTCE (9.8%) vs. cost of equity (8.2%)
Implied Market Multiple
1.58x
Summary
With ROTCE of 9.8% vs. 8.2% cost of equity, fair P/TBV is 1.39x on $22.66 tangible book, implying $31.58 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