The price to book ratio for the S&P 500 financial sector is down to 1.2 versus a price to book of 1.3 in March earlier this year. Argus Research notes:
The S&P 500 Financials index is close to the bottom reached in March 2003, coincidentally about the same time that the broader S&P 500 hit its own bear market low. This time, however, the S&P 500 is less than 15% from its 2007 peak while the Financials are down by nearly 40%. Probably more revealing is that the Financials index now trades for just 1.2-times reported book value, the lowest level since the last major credit crisis in the early 1990’s. At these levels, we’d be ready to sound the ‘all-clear’ signal if not for the fact that we believe that analysts as a group are still too optimistic about bank earnings over the next few quarters. Our 2008 estimates are below the consensus for many of the banks that we follow. We expect a busy second-quarter pre-announcement period for the banks over the next few weeks which may start to finally dampen expectations for 2008.
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Financials: Where’s the Bottom? ($)
Argus Research Company
June 16, 2008