Get the very latest thinking from Mercer Capital in the latest issue of our bank-focused e-mail newsletter, Bank Watch, which is available now.
The December 2012 issues feature a reprint of an article by Jeff Davis titled, “Rainy Day Liquidity is a Good Thing.”
Capital can be quickly lost by unexpected market events, internal issues such as product failures, poorly conceived and over-priced acquisitions, or loan losses. This is one reason in the highly levered world of banking and trading, but not asset management, that modest P/E multiples are usually warranted when one contemplates earning power. Sometimes better-than-average earnings growth may warrant a notably better sector multiple, but that usually applies to a small minority of institutions…Secondly, dilution can be brutal if a snafu leads to a recap situation as a result of lending and investing decisions made in the years leading up to the financial panic…The third point is that rainy-day liquidity is a good thing, especially for investor-operators in a sector that they know.
The latest issues of Bank Watch cover bank activity in five U.S. regions, including the Atlantic Coast, Midwest, Northeast, Southeast, and West.
Each regional edition of Bank Watch highlights various banking metrics, including public market indicators, M&A market indicators, and key indices of the top financial institutions, providing insight into financial institution valuation issues.