The XLF is up 21.6% year to date, which is more than any other sector SPDR. KBE, the large cap banking ETF is up a little more than that ~22% driven by BAC which is up a stunning 76% for the year. BAC is still the cheapest large banking stock in the group, trading at just 0.73x tangible book value. Large banks as a whole are still cheaper than their smaller regional counterparts as evidenced by the table below:
Most people would tell you that this discrepancy is driven by concerns over what regulation such as Dodd Frank will do to large banks' earnings power. Will regional banks really earn a 40-50% higher ROE than money center banks will though? That seems to be what the valuations are implying.
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