In The AFR I argue that following the (predictable) ~40% fall in ANZ and NAB's share prices they are starting to look extremely cheap on some bases. Specifically, they are trading at 1.2 times and 1.4 times book value, respectively, which is just a shade above the all-time lows touched during the dark days of the GFC. In contrast, CBA looks heinously expensive at 2.4 times book while Westpac is also dear at 1.9 times book. I benchmark the four majors against Warren Buffett's two favourite US banks, Wells Fargo and US Bancorp, and the four big Canadian retail banks, which share similarities with their Australian brethren. I also address a more fundamental question regarding where banks should theoretically price relative to book value: in short, if RoEs do not exceed the cost of equity then no premium is warranted (the likes of Bank of America, RBS, and Deutsche Bank all trade at a chunky discount to book)... Read for Free here (VIEW LINK)
Christopher Joye is Co-Chief Investment Officer of Coolabah Capital Investments, which is a leading active credit manager that runs over $2.2 billion in short-term fixed-income strategies. He is also a Contributing Editor with The AFR.