macroguy

When Will Fifth Third Bancorp Turn Around?

Stewie,

Valid point but it doesn't apply to most banks (save trust banks like Northern and Mellon). The problem with fee based revenues is they are volatile. This is why investment banks consistently trade at weak p/e ratios. When fee based revenues became difficult to project (i.e., investment banking fees from securitizations, IPOs M&A, etc.), investors tend to revert to assessing price versus book. Take a look at where the top 10 banks are trading today (JPM less than book, etc.). The more things change... the more they stay the same.


On Jun 22 05:15 PM Stewie wrote:

> That's a valid point for sure but about a dozen years behind the
> curve. Today commercial banks rely far more on fee revenue, than
> the loan portfolio as a their primary earnings engine. That's why
> many banks are now trading at multiples of tangible book that would
> have seemed insane in 1990. Just look to some of the recent bank
> mergers (last seven years) as evidence. In 1990 the market would
> have punished a bank who paid more than 125% of book, now deals of
> 3 to 4 times book are standard. I am not saying all of it is prudent
> but that's the way it is.