Why is Wells trading at a TBV of 1.25 when Citi, which has a stronger investment bank, better management, and selling parts of it's asian consumer banks, is only at .8 TBV. I understand that Citi has increased regulatory risks, but there has to be something I am missing here.
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Hi johnfinn, whoops, looks like nobody chimed in here.... maybe one of these discussions below is relevant:
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Since markets are forward-looking, there is more growth being assigned to WFC...not sure how else to answer that.
In theory that definitely makes sense - if I were asked in an interview why ABC trades at a higher multiple, pricing in growth would be the clear answer. In practice through, Citi has a annualized growth rate of revenue of around 1% compared to Wells -6% (over a three year time period) in addition to no net margin growth for Wells and slight increases in net margin for Citi. Clearly, markets are forward looking, but I doubt that Wells' growth will massively outpace Citi's.
Wells is operating under an asset cap and finally moving out of the crosshairs of regulators. So there are some tailwinds there.
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