Harvard Winters
Long/short equity, growth at reasonable price, value

Why KeyCorp May Be One Of The Bank Sector's Safest Bets

Some investors believe a bank's share price shouldn't dip below tangible book value per share ("TBV-PS"), because if it did, a bank could liquidate its assets and liabilities and make a cash distribution equal to TBV-PS. I don't agree with this view for several reasons. The bank's tangible book value number might be suspect, or return on tangible common equity might be low enough to justify the valuation discount. Lastly, even if a bank's management team could liquidate assets and liabilities at their stated value for no cost and then shut down, it wouldn't actually do it. So why value a bank as if it would?

With that said, if I see a bank trading at a material discount to...

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