JPM Historical Price to Tangible Book Value

JPM reported another nice quarter this morning and the stock is now trading back near 52 week highs.  The banking industry in general has had very strong stock performance over the last six months, but especially for the "darling" banks (JPM, WFC, et al.) valuation is starting to approach historical averages.  Below is the long term history of JPM's price to tangible book ratio.  Buyers here need to believe that the multiple can continue to expand back to levels reached in the late 90s (or be comfortable with book value growth driving returns).

JP Morgan Price to Tangible Book History

Source: Wolfram Alpha

Q3 Bank Earnings Preview

JPM will kick off earnings season for financials tomorrow, and the whispers seem to be that the quarter is going to be pretty good.  Hopefully JPM will show signs that the banking system is continuing to heal and that profitability is returning.  Whereas a couple of years ago investors would have had a laser like focus on capital and asset quality metrics, this quarter the metrics that I'll be paying close attention to are (among others): Return on Equity, Loan Growth and NIM.  Below are charts of how these have trended for the banking system over the last decade.

While asset quality has gotten a lot better for the aggregate portfolios and charge offs have slowed to pre-recession levels, banks are still holding a lot of non-accrual assets in their residential books.  It will be important to see if the system is taking the opportunity provided by improving housing prices to finally clean their books completely.  This will have major implications for future lending.

What Percent of Bank Holding Company Assets are Held at Commercial Bank Subsidiaries?

The New York Fed is putting together a new banking industry report which can be found here.  It's not as comprehensive as the one that the FDIC puts together on a quarterly basis, but it is valuable in that it goes beyond just the commercial bank subsidiary and looks at the whole bank holding company.  As the following chart shows, less than 80% of assets consolidated on an average Hold Co's balance sheet are held in the commercial bank.  Some other interesting data on BHCs is also below including geographic exposure of systemic assets (i.e. to Europe).