6 Undervalued Bank Stocks to Buy Now
I am writing today about six undervalued bank stocks to buy now. These banks are high quality as they will keep paying their dividends and buying back stock. Those two measures will help push their prices higher. Moreover, their valuations are very inexpensive with low price-to-earnings (P|E) multiples, and low price-to-tangible book value per share (P|TBVPS) ratios. The average of this group is 8.8x and the average yield is 3.89%, as the table on the right shows. Source: Mark R. Hake, CFA However, due to bank’s inherent leverage, even if just 3% of the loan assets stop making payments and the bank has to begin the process of writing them off, it reduces equity by 30%. That is, the book value will drop precipitously. The market will react violently to this and the bank will have trouble raising capital to replace that reduction. Then the regulators come in and screw the nuts even tighter. This is why banks keep reserves and also start taking provisions. Moreover, smaller regional banks tend to be under less pressure than other larger money center banks.
6 Undervalued Bank Stocks to Buy Now
I am writing today about six undervalued bank stocks to buy now. These banks are high quality as they will keep paying their dividends and buying back stock. Those two measures will help push their prices higher. Moreover, their valuations are very inexpensive with low price-to-earnings (P|E) multiples, and low price-to-tangible book value per share (P|TBVPS) ratios. The average of this group is 8.8x and the average yield is 3.89%, as the table on the right shows. Source: Mark R. Hake, CFA However, due to bank’s inherent leverage, even if just 3% of the loan assets stop making payments and the bank has to begin the process of writing them off, it reduces equity by 30%. That is, the book value will drop precipitously. The market will react violently to this and the bank will have trouble raising capital to replace that reduction. Then the regulators come in and screw the nuts even tighter. This is why banks keep reserves and also start taking provisions. Moreover, smaller regional banks tend to be under less pressure than other larger money center banks.