Fourth-quarter earnings at the four major commercial banks show a divide between those that achieved profitability (JPMorgan Chase
Shares look cheap
The risk of further credit losses at quality banking institutions is offset by share valuations, which look pretty cheap ... on the basis of "normalized" earnings that are probably a couple of years down the road (see table). Last week, for example, value guru Bill Miller of Legg Mason
Company |
Price/Earnings Multiple (FY2012 Earnings) |
---|---|
Wells Fargo |
7.2 |
Citigroup |
6.5 |
Bank of America |
6.1 |
JPMorgan Chase |
7.6 |
Source: Capital IQ, a division of Standard & Poor's.
Investors who can mimic Wells Fargo's largest shareholder, Berkshire Hathaway
A wild ride still ahead?
Here's one statistic I saw this morning that suggests the banking industry still faces some headwinds: According to data from research firm Foresight Analytics, more than a third (36%) of the $270 billion in commercial real estate loans maturing this year are underwater. The percentages for loans maturing in 2011 and 2012 are even higher: 49% and 63%, respectively. For bank shareholders, the wild ride might not be over yet.
The Fed's policies are creating a new set of tangible risks for investors. Motley Fool Global Gains co-advisor Tim Hanson explains why it's time to get out now.