Sample note. Numbers are illustrative placeholders, not live data.
Framing
Banks are hard to value because their earnings are a function of the rate cycle as much as of management. The exercise here is to strip out the cyclical part and see what is left.
Structural versus cyclical
| Line | Cyclical | Structural |
|---|---|---|
| Net interest income | Rates, deposit betas | Deposit franchise |
| Investment banking fees | Deal cycle | Market share gains |
| Card and payments | Consumer credit | Network scale |
| Technology spend | — | $17B+ annual budget |
The number I anchor on
A through-the-cycle return on tangible common equity in the high teens supports a price-to-tangible-book well above peers. The question is whether that gap is the right size.
Risks
- Regulatory capital rules changing the denominator
- Credit normalization in cards
- A prolonged flat curve compressing net interest income
Educational content only. Not investment advice.