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As a heads up, this is a relatively short article. This is not an in-depth look into the future earnings of the major banks, but rather a simple observation from an exercise I happened to be doing and thought I would share.

I was looking at different financial stocks after the close yesterday to see how various banks have fared over the past couple days. Market leaders like Goldman Sachs (NYSE:GS) and JP Morgan (NYSE:JPM) have had tremendous rallies off the March lows, helped in part by an excellent quarter for trading revenues.

However, lately the real price action has been in the bank stocks that were seen as too risky early on in the recent rally. Traders were bidding Bank of America (NYSE:BAC) up like crazy on the news that hedge funds were taking large positions in the company.

Now it seems like some of that price action has moved over to Citigroup (NYSE:C). Jim Cramer has been on several rants lately about what a great deal Citigroup is at this level, even going so far as to suggest a Sovereign Wealth Fund should buy a 10% stake from the US government.

My question is simple: given the massive rally we’ve had over the past six months, which banks are now becoming overpriced? Six months ago, anyone would have told you that the business models were broken and it was almost impossible to fairly value the bank stocks.

Well now that we have a return of stability and normalcy to the markets, I think it’s worth comparing these banks' future earnings. I’ve put together a table below with the six major banks ranked by how secure I feel they are perceived in the public eye. It will give you a quick look at the premium people are willing to pay right now, compared to average earnings estimates for this year and next.

I realize this is not perfect because predicting these future earnings will have a large margin of error, however it is still a good comparative basis. (As a disclosure, all average earnings estimates were pulled from Yahoo Finance)

I’ve bolded what I find most surprising about this little exercise. Despite the move into Citigroup lately and Jim Cramer’s repeat endorsements, the company is still only expected to earn $0.09 in 2010.

The only other major bank still expected to post a loss in 2009, Morgan Stanley (NYSE:MS), is expected to earn $3.14 in 2010. Not only are analysts predicting an anemic profit for Citigroup in 2010, but also the expected revenue growth really doesn’t seem to justify its current stock price. I think because of its comparatively low stock price, Citigroup looks to some like the bank stock that’s lagging the recent rally.

However, with a forward P/E ratio of 46 and a rally of better than 300% off its March low, I think Citigroup is beginning to look very overpriced.

There are clearly many factors in play that are not represented in the above numbers. This was merely an exercise that happened to show something interesting. I don’t think we will see Citigroup go bankrupt anytime soon, however, it was probably the most badly damaged of the still surviving banks.

This stock has been swept upwards with all the other survivors, but I think the profit forecasts look considerably bleaker than its peers.

Disclosure: Short C