VALUE: After Hours (S08 E08): Why Small Cap Banks Are So Cheap Right Now

During their recent episode, Taylor, Carlisle, and Derek Pilecki discussed Why Small Cap Banks Are So Cheap Right Now. Here’s an excerpt from the episode:

[Derek] I think so, yeah. I mean, I think you think about the normal valuation range for banks. It’s, you know, 10 to 14 times GE, and they seem to be trading eight or nine times earnings.

So it’s like below the bottom end of the range. I think banks are cheap. I think it’s, we’re still living through the post-Silicon Valley, first republic environment.

And so banks are just, you know, they’re trading cheap still. And I think there’s some reason, you know, people really haven’t figured out that the yield curve is, has more juice in it. So the banks can earn higher returns and M&A environment’s improving and deregulation is happening.

So, you know, I can see a scenario where they get back to their normal valuation range, but they’re, they’re cheap now. Small cap banks are cheap.

[Tobias] I actually thought you were going to say you thought it was a hangover from the GFC, but you, you short circuited me there. But what do you think about the, it’s my impression that banks have still suffered a little bit from that GFC, you know, that sort of underscore undiscoverable risk in the balance sheets.

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