Richard X. Bove, vice president of equity research financial sector at Rafferty, highlighted shifts in bank valuation methods. He explained that variables used to evaluate banks have shifted from earnings to tangible book value and most recently to return on equity. Bove also studied the relationship between price to book value and return on equity for banks. The correlation between both variables has become stronger after 2000. Banks considered included universal, regional, trust and Canadian.

Banks return on equity
Source: Rafferty Capital Markets, LLC

Please login to view the rest of this article - Not subscribed? Get our adfree exclusive content for only a few dollars a month.

It also helps us fund our operations so think of it as supporting quality journalism.