When Cheap Banks Just Aren't Worth It

By Matt Koppenheffer and David Hanson – Jun 1, 2013 at 10:00AM

NYSE: USB

U.S. Bancorp

Market Cap

$64B

Today's Change

(-0.20%) -$0.08

Current Price

$40.97

Price as of April 23, 2024, 4:00 p.m. ET

Sometimes, "a good bank at a fair price" beats a cheap bank hands down.

In the following video, Motley Fool financial analysts David Hanson and Matt Koppenheffer discuss a balanced approach to valuing bank equities.

David compares Bank of America's (BAC 1.70%) relatively cheap stock price and current low returns on equity with US Bancorp (USB -0.20%), a stock currently trading at a much higher valuation compared to tangible book value.

David also explains how Citigroup (C 2.82%) and Bank of America's current low valuations may represent a longer-term opportunity for investors, and he looks at Wells Fargo (WFC -0.26%) as an example of how a bank stock might provide great returns to investors in the future, despite a relatively high current valuation.

David Hanson has no position in any stocks mentioned. Matt Koppenheffer owns shares of Bank of America. The Motley Fool recommends Wells Fargo and owns shares of Bank of America, Citigroup, and Wells Fargo. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.