Everyone always seems to want a good bargain. That’s even true for many investors. One traditional “bargain” category for investors is to find stocks with share prices under their perceived or stated book values. Bank stocks have been a longstanding sector to find companies that are valued under their stated book value. That said, in 2024 there just are not that many large banks which are still trading at a discount to their book value. And then there is the Federal Reserve angle — aren’t banks supposed to win as the Fed lowers interest rates?
Oggonomics is taking a look into the U.S. banking sector to see which banks that are currently under their stated book value for long-term investors. This may not be as “strategic” because buying stocks under book value may take longer to play out (if they play out) than simple sector rotations. To fit within this screen, banks had to have a minimum of a $5 billion market cap to avoid the tiny banks.
Another issue is that many foreign banks are at discounts to book value, but only the U.S.-based banks were considered to avoid any cross-border issues. These banks had to have solid dividends, and their finances had to not be in freefall. They also had to be under their consensus analyst price targets (from FinViz) to make sure that analysts weren’t expecting a sudden drop. The stock prices of today have also been compared prior stock highs before or around when the Fed began aggressively hiking interest rates.
One issue which should stand out is that only one of the money-center banks is even listed under book value. Also, none of the non-banks under Treasury scrutiny which are now classified as bank holding companies trade at a discount to book value. By comparison, JPMorgan Chase & Co. (NYSE: JPM) is the absolute leader with a fortress balance sheet and it is valued at 1.9-times its book value. Wells Fargo & Co. (NYSE: WFC) is valued at 1.2-times book value and Bank of America Corporation (NYSE: BAC) is valued at 1.16-times book value.
DISCLAIMERS & WARNINGS
Oggonomics would like to issue a few key reminders and warnings here. There are absolutely no assurances that buying at a discount to book value will translate to appreciation ahead. And some of the banks may even see their book value per share fall ahead. And keep in mind that the book value is the bank’s own stated book value (tangible book values are always much lower) and the figures are as of June 30, 2024. These book values may all change, some higher and some lower, after the earnings reports are released in October.
Investors and traders that chase book value discounts usually do not see a quick investment. And even if one of the banks is suddenly acquired, none of these banks screened herein have recently been the subject of rumor-mill buyout targets. And many investors would argue that if they are at a discount to book value it is because certain earnings metrics or operational concerns merit trading at a lower multiple.
This list of banks under book value include the share price mid-morning on Friday (9/27). We have listed the “Price/Book” as a ratio, shown the current market cap, the respective dividend yields, and the 52-week trading range of each bank. The consensus analyst price targets are from FinViz and additional context or color has been added on each bank.
These banks have been listed in alphabetical order to avoid the appearance of any ranking or prioritization of one bank over another.
THE MIGHTY CITI
Citigroup, Inc. (NYSE: C)
>Stock Price: $62.37
>Price/Book: 0.63
>Market Cap: $119 billion
>Dividend: 3.48%
>52wk Range: $38.17 – $67.81
>Cons. Target: $72.57
While Citigroup trades at a much deeper discount than other money-center banks, that has been the case for years. Citi is more complex, mostly dealing with commercial accounts, and it still has a very large international operation even after selling off many international assets and units over the last decade. This has made it more difficult for the investment community to value. There also seems to always be ongoing restructuring compared to the other largest banks. Citi had reached an $80 share price in the first-half of 2021.
CITIZENS
Citizens Financial Group, Inc. (NYSE: CFG)
>Stock Price: $40.94
>Price/Book: 0.85
>Market Cap: $18 billion
>Dividend: 4.10%
>52wk Range: $22.77 – $43.96
>Cons. Target: $44.83
Citizens is a commercial and consumer bank headquartered in Rhode Island. It dates back to 1828 and has $219.9 billion in assets, and it claims 3,300 ATMs and approximately 1,000 branches in 14 states (plus D.C.). This stock was above $55 back at the start of 2022, and investors may note that capital markets fees surged 63% in the last quarter as its core strength. Its earnings are down and net interest income (NII) was lower. The bank did warn NII could dip another 1% to 2% before rebounding as it has swap positions to hedge against potentially lower rates. One benefit — management said at the last earnings that it might repurchase as much as $250-$300 million in stock in the third quarter.
FNB
F.N.B. Corp. (NYSE: FNB)
>Stock Price: $14.06
>Price/Book: 0.0.84
>Market Cap: $5 billion
>Dividend: 3.41%
>52wk Range: $10.24 – $15.65
>Cons. Target: $16.56
F.N.B. is headquartered in Pittsburgh and operates in 7 states (and D.C.) with total assets of nearly $48 billion and roughly 350 banking offices. It has handily grown its loan portfolio but earnings dipped from 2023. Its tangible book value per share grew 12% year-over-year to reach a record high at $9.88, with non-performing loans dropping and charge-offs at only 0.09%, noting it remains well-positioned for “a better rate environment.” FNB’s shares hit a multi-year high earlier in 2024.
PROSPERITY
Prosperity Bancshares Inc. (NYSE: PB)
>Stock Price: $71.65
>Price/Book: 0.94
>Market Cap: $6.8 billion
>Dividend: 3.13%
>52wk Range: $49.60 – $74.87
>Cons. Target: $80.28
Prosperity Bancshares is a Texas-based bank with operations in Texas and Oklahoma. It only just completed its acquisition of Lone Star State Bancshares (5 branches in West Texas) at the start of Q2-2024. It also completed the acquisition of First Bancshares of Texas (16 branches) a year earlier. One sign of strength is that nonperforming assets was only 0.25% of second quarter average interest-earning assets. Its net interest margin of 2.94% was rising and was noted as “tailwinds to continue to be positive for the near future.” While the consensus price target is around $80, Wedbush Securities just recently raised its price target to $90.
TRUIST (BB&T PLUS SUNTRUST)
Truist Financial Corporation (NYSE: TFC)
>Stock Price: $42.25
>Price/Book: 0.98
>Market Cap: $57 billion
>Dividend: 4.8%
>52wk Range: $26.57 – $45.31
>Cons. Target: $46.79
In the prior quarter, Truist had completed the divestiture of its remaining stake in Truist Insurance Holdings. This effort and organic capital generation raised its CET1 capital ratio up to 11.6% and raised its tangible book value per share by 34%. The last stated book value per share was $42.71. Its tangible book value per share was still down at $28.91 last quarter. Truist is a full-service banking player based in North Carolina and operations in many states, and it dates back to 1872. With a new name, it is the culmination of the former BB&T and SunTrust. Truist was a $60 stock in early-2022.
WEBSTER, NOT THE DICTIONARY
Webster Financial Corp. (NYSE: WBS)
>Stock Price: $46.78
>Price/Book: 0.94
>Market Cap: $8 billion
>Dividend: 3.4%
>52wk Range: $36.36 – $53.39
>Cons. Target: $55.38
The parent of Webster Bank usually goes without being in the news too often. Earnings have been lower due to “net securities repositioning losses” but it has also grown loans, deposits and interest income. Webster also owns HSA Bank and the Ametros business covering health savings, insurance settlements and flexible medical spending which could be unlocked as value if it ever chooses to or decide it needs the capital. Its stated book value is $49.74 per share and the tangible book value is $30.82 per share, both of which are higher than the prior year. Webster was a $60 stock in early-2022.
