Now comes news that Bank of America will need to raise about $35 billion in additional capital, on top of the $45 billion they’ve already received.
Will be interesting to see what happens there.
In longer term prospects, American International Group, Inc. is trading with a 0.07 price-to-book ratio. This means that the book value of the company, if it were to be completely liquidated is currently about $24.70/share … AIG closed today (May 5) at $1.73. Looks like a lot of potential for growth there; especially since it now appears that AIG will not need another capital infusion from the Fed during this quarter.
Morgan Stanley, on the other hand, is trading with a P/B ratio of 0.89, so at today’s close of $27.21/share, the company’s book value is closer to $30.40/share. Citigroups P/B ratio is 0.25, so at today’s close of $3.31/share, the company’s book value is about $13.25/share. Still room for growth in the prices of these two companies’ stocks and still not pricing them over book value.
In a strong economy, companies typically trade somewhere above their book value; during the last bull market, Wells Fargo was trading a 2.4 times book value; and is currently trading about 1.4 times it’s book value. Depending on your point of view, it could potentially be viewed as overpriced, especially in light of its need to raise additional funds.
But what do I know?