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Zecco.com » Top ZeccoShare Holdings » Citigroup (C) » Bank stocks: Cheap?
Last post 03-15-2008, 1:07 PM by ou812__. 4 replies.
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  •  03-14-2008, 9:46 PM 25161

    Bank stocks: Cheap?

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    Despite recent turmoil within US credit markets, banking stocks are beginning to look rather attractive. Citigroup (C), Bank of America (BAC), Washington Mutual (WM), Wachovia (WB), and many others, for example, have fallen well in excess of 20% over the last 52 weeks. P/E ratios for the sector have fallen to an average low of 11.6x compared to a five year historical average of 14.1x. The average dividend yield currently stands at roughly 5.2%, nearly 2% higher than the sectors five year average yield. I suspect bargains a floatin. Any ideas?

    Also, below I have contained stock valuations on various large banking stocks.

    Citigroup

    Year ROE Payout Growth EPS Dividend Present Value
    1    0.17     0.45     0.09      1.28           1.16
    2    0.17     0.45     0.09       3.48      1.57           1.29
    3    0.17     0.45     0.09       3.81      1.71           1.29
    4    0.17     0.45     0.09       4.16      1.87           1.28
    5    0.17     0.45     0.09       4.55      2.05           1.27
    6    0.16     0.50     0.08       4.92      2.46           1.39
    7    0.16     0.55     0.07       5.27      2.90           1.49
    8    0.15     0.60     0.06       5.59      3.35           1.56
    9    0.15     0.65     0.05       5.88      3.82           1.62
    10    0.14     0.65     0.05       6.17      4.01           1.55
    10     82.49          31.80
     Cost    of equity      0.10  Value of Citigroup            $45.71

     

    Bank of America
    Year ROE Payout Growth EPS Dividend Present Value
    1 16.13% 45% 8.87% 2.56 2.35
    2 16.13% 45% 8.87% 4.44 2.00 1.68
    3 16.13% 45% 8.87% 4.83 2.18 1.68
    4 16.13% 45% 8.87% 5.26 2.37 1.68
    5 16.13% 45% 8.87% 5.73 2.58 1.68
    6 16.13% 50% 8.07% 6.19 3.10 1.85
    7 16.13% 55% 7.26% 6.64 3.65 2.00
    8 16.13% 60% 6.45% 7.07 4.24 2.13
    9 16.13% 65% 5.65% 7.47 4.85 2.24
    10 14.00% 65% 4.90% 7.83 5.09 2.15
    10 130.29 55.04
    Cost of equity 9.00% Value of Bank of America $74.46

     

    Year ROE Payout Growth EPS Dividend Present Value
    1 13.46% 40.00% 8.08%  $   4.79  $    3.03  $   2.77
    2 13.46% 40.00% 8.08%  $   5.36  $    2.14  $   1.79
    3 13.46% 40.00% 8.08%  $   5.79  $    2.32  $   1.76
    4 13.46% 40.00% 8.08%  $   6.26  $    2.50  $   1.74
    5 13.46% 40.00% 8.08%  $   6.77  $    2.71  $   1.72
    6 13.46% 45.00% 7.40%  $   7.27  $    3.27  $   1.89
    7 13.46% 50.00% 6.73%  $   7.76  $    3.88  $   2.05
    8 13.46% 55.00% 6.06%  $   8.23  $    4.52  $   2.18
    9 13.46% 60.00% 5.38%  $   8.67  $    5.20  $   2.29
    10 12.00% 65.00% 4.20%  $   9.03  $    5.87  $   2.36
    10  $114.36  $  45.93
    Cost of equity 9.55% Value of Suntrust $66.47

     

    Washington Mutual
    Year ROE Payout Growth EPS Dividend PV
    1 16.66% 60% 6.66% 0.60 0.55
    2 16.66% 60% 6.66% 1.39 0.60 0.50
    3 16.66% 40% 10.00% 1.53 0.61 0.46
    4 16.66% 40% 10.00% 1.68 0.67 0.46
    5 16.66% 40% 10.00% 1.85 0.74 0.46
    6 16.66% 45% 9.16% 2.02 0.91 0.51
    7 16.66% 50% 8.33% 2.19 1.09 0.56
    8 16.66% 55% 7.50% 2.35 1.29 0.60
    9 16.66% 60% 6.66% 2.51 1.50 0.64
    10 16.66% 65% 5.83% 2.65 1.73 0.67
    10 43.80 16.89
    cost of equity 10% Value of Washington Mutual 22.29

     

    Angell

  •  03-14-2008, 11:41 PM 25162 in reply to 25161

    Re: Bank stocks: Cheap?

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    I really like Regions Financial, P/E of 11, which last week was a nine, so it's staying low, has a great debt/equity ratio 1.13, and the dividend yield is at 7%.
    UMFALCON

  •  03-15-2008, 12:44 AM 25167 in reply to 25162

    Re: Bank stocks: Cheap?

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    Goldman Sachs is cheap. Last week, I really felt Cramer made a severe mistake in recommending Bear Sterns as I knew that it was expensive given its liquidity issues. I think that another broker (not Goldman) may face similar troible before everyhing is said and done.

    The only brokers I like are Goldman Sachs and T Rowe Price. I like Prudential as an insurer and I like WFC and USB for bank stocks.
    Aqua

  •  03-15-2008, 12:50 AM 25168 in reply to 25161

    Re: Bank stocks: Cheap?

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    I'm still holding onto Bank of America and Wells Fargo. They make up about twenty percent of my portfolio and I could have gotten out a few weeks ago and still made a little money, but I'm in for the long haul.  I do think the banks will bounce back, but not for months.  Thanks for your numbers.

  •  03-15-2008, 1:07 PM 25174 in reply to 25168

    Re: Bank stocks: Cheap?

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    Adding citigroup and jpm to IRA account in 10 years this will be history and who knows where valueations will be but I'm betting higher !!! imho
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