The major bulge bracket Wall Street Banks Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America, Citi are overvalued by more than 25 % each, as far as I am concerned.
The main reason, according to my view is that there is a pending deep economic recession and the big five Wall Street banks hold large portfolios of risky assets, predominantly FX swaps and real estate off their balance sheet, which the Federal Reserve sooner rather than later will force them to report on balance and hence the losses for Goldman Sachs, JPMorgan, Morgan Staley, Bank of America, Citi will pile up significantly.
What is more, Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America, Citi all have large exposures to the information technology sector, which has been leading the US and global economy since 2009.
Now the technology companies are shedding hundreds of thousands of jobs, suffering declining revenues and profits. Naturally, the big Wall Street banks will suffer a lot.
Goldman is 30 % overvalued, JP Morgan by 35 %, Morgan Stanley by 50 %, Bank of America by 40 % and Citi by 25 % approximately, in my view.
The overvaluation for Citibank is the smallest since Citigroup due to various mishaps and scandals has been trading at low multiples, deep into value territory.
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