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Post by kramer on Nov 13, 2010 14:49:10 GMT -6
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Post by unlawflcombatnt on Nov 13, 2010 16:46:30 GMT -6
I heard the same thing about Bank of America a week ago. The source of this information is from a Johnathan Weil article in Bloomberg: " Now the bank may be on the verge of trouble again. Its stock has fallen 41% since April 15. Mortgage-bond investors are demanding untold billions of dollars in refunds....
You wouldn’t know there’s anything wrong with Bank of America by an initial look at its balance sheet. The company showed common shareholder equity, or book value, of $212.4 billion as of Sept. 30. And its regulatory capital ratios have risen steadily throughout the year.
Tipping Point
Judging by its shrinking stock price, though, investors are acting as if Bank of America is near a tipping point. Its market capitalization stands at $115.6 billion, or 54% of book value. That’s the second-lowest price-to-book ratio among the 24 companies in the KBW Bank Index, and well below the 76% ratio the company was at in October 2008 when it landed its first round of TARP dough. Put another way, the market is saying there’s a $96.8 billion hole in Bank of America’s balance sheet.So despite Bank of America's current "book value" of $212 billion, it would sell for only $115.6 billion on the market.
Bank of America's book value overstates the bank's current market value by $96.8 billion.
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