Bank Valuation (P/TBV): How Investors Value Banks
Bank valuation explained: why investors use Price-to-Tangible-Book (P/TBV), what drives bank ROE, and how to interpret bank multiples safely.
Why banks are valued differently
Banks are balance-sheet businesses. Book value (and tangible book value) matters more because assets and liabilities are the core product. Cash-flow DCF is often less intuitive for banks than for operating companies.
What is P/TBV?
P/TBV compares the stock price to tangible book value per share. Investors often compare P/TBV to profitability (ROE) and risk (credit quality, funding stability).
How investors use it
- Compare P/TBV to ROE: higher ROE can justify higher P/TBV
- Assess credit risk and cycle exposure
- Use as a peer comparison within similar bank types
Bank multiples can look cheap before losses are recognized. Combine valuation with conservative assumptions and a margin of safety mindset.
Research bank stocks
Use stock pages and the screener to compare valuation and quality signals across financials.
FAQs
Is P/TBV better than P/E for banks?▼
Often yes. P/TBV ties more directly to the bank balance sheet. Many investors use both, but P/TBV is a common starting point.
What is a “good” P/TBV?▼
It depends on ROE, growth, and risk. A high-quality bank with strong ROE can justify a higher multiple than a risky bank.
Related
Intrinsic Investor is for education and research only. Not financial advice.