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Bank valuations

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"A bank that earns 1.3 or 1.4% on assets is going to end up selling above tangible book value. If it's earnings 0.6 or 0.5% it's not going to end up selling above tangible book value. Book value is not key to valuing banks. Earnings are key to valuing banks, and you earn on assets. Now it translates to book value to some extent because you are are required a certain amount of tangible equity compared to the assets that you have. You've got banks like Well Fargo & USB that earn very high return on assets and they sell at a good price to tangible book. You've got other banks like the 2 you mentioned that are earning lower returns on tangible assets and they're going to sell below book." Warren Buffett

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