NEW YORK (TheStreet) -- This chart shows just how low the stocks of the largest U.S. banks are trading, relative to book value, despite the amazing run for the financial sector over the past two years:
Here's a quick summary of where stocks of the "big four" U.S. banks stood at Friday's market close:
Shares of JPMorgan Chase (WFC) - Get Wells Fargo & Company Report closed at $57.46 Friday and traded for 1.6 times tangible book value, according to Thomson Reuters Bank Insight, and for 9.6 times the consensus 2014 earnings estimate of $6.01 a share.
Bank of America (BAC) - Get Bank of America Corp Report closed Friday at $15.64 and traded for 1.2 times tangible book value. The shares traded for 11.7 times the consensus 2014 EPS estimate of $1.34.
Wells Fargo (WFC) - Get Wells Fargo & Company Report on Friday closed at $44.36 and traded for 2.2 times tangible book value. The shares traded for 11.1 times the consensus 2014 EPS estimate of $4.01.
A group of six large-cap bank stocks, including the four above, trade at an average price-to-tangible-book ratio of 1.8, and an average forward price-to-earnings ratio of 10.6, according Oppenheimer analyst Chris Kotowski. In comparison, the S&P 500undefined trades for 14.7 times forward earnings estimates. Kotowski in a client note last week wrote that "The market is valuing the stocks on the immediately visible near-term earnings, not where they can go as banks manage toward returns in the coming years."
The market discount on big bank stocks reflects the view "that returns can't get much better than they are," according to Kotowski. "Thus in our view, we are getting a more or less free option on the prospect that bank [returns on equity] will indeed normalize over time," he wrote.
For much more on current bank stock valuations and where they may be headed, please see TheStreet'sBig Bank Stocks Are Still Cheap.
-- Written by Philip van Doorn in Jupiter, Fla.
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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.