Many bank analysts have been arguing that investors should buy bank stocks because capital is building faster than it can be deployed. The Federal Reserve, unlike during the pre-crisis era, is governing the amount of capital returned to shareholders. Basel III is another governor, especially given the enhanced leverage ratio requirement large U.S. banks are facing.
But are buybacks a good idea for bank managers today? I question the wisdom of many of the repurchases that are occurring when bank stocks are trading at price-to-earnings ratios in the mid-teens and at 1.5x to 2.0x price to tangible book value. The bane of buybacks, and M&A for that matter, is the human propensity to engage in risky behavior at the top of the market when all is well and risks seem minimal.
This issue also includes the announcement of Mercer Capital’s newest publication, FinTech Watch.
This complimentary newsletter focuses on the financial technology industry, providing information on corporate valuation, financial reporting, transaction advisory, and related topics.
The November 2013 issue also contains links to various articles of interest, as well as public market indicators, M&A market indicators, and key indices of the top financial institutions in the U.S., providing insight into financial institution valuation issues.
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