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To answer that, analysts traditionally look at the bank’s profits.
That’s not so feasible now: Even if a bank should trade for 10 times its earnings per share, 10 times zero is still zero.
For a while, analysts looked at what the bank would get if it shut down and sold all its assets, or its “tangible book value.” That worked when the industry seemed on the edge of shutting down. Since early March, though, some analysts have looked to so-called “normalized earnings,” or what banks would earn under “normal conditions.”
Analysts from Fox-Pitt Kelton say it’s likely too early for this new model, which values bank stocks higher.
