What Do Banks Think the Eventual Value of Their Assets Will Be?
The current balance sheet of the U.S. Banking and Thrift system (trillions) shows $13.5 in assets, of which $13.4 are not cash or bank credit. $8.1 of that is loans (includes conventional and toxic assets). So far, the banks have taken a $1.2 write-down against $13.4, or 9%. Stated another way, they are representing that their assets have a combined current value of 91%. (source: Bank of America) There are several current estimates of what the total write-down will turn out to be, but a total of $3.6 (27%, or 73% final value) is a number frequently seen. This 91% to 73% valuation space, by the way, is where the PPIP private investment plan succeeds or fails, since the bid price will likely be below a 73% valuation. Potential investors usually look to make a profit of at least 25% from long-term asset value growth.
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- What Do Banks Think the Eventual Value of Their Assets Will Be?
