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ING Groep N.V. Message Board

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  • jpomper jpomper Aug 13, 2011 4:46 AM Flag

    Book values and current PPS

    Banks by definition have 10-15 leverage ratio, called gearing. It is mesured as RWA (RiskWeightedAssets) ratio to Equity(BookValue);

    If a 10 times leveraged bank lost just 10% of RWA by way of recession, crash, etc.(which is a lot),
    they lose all their Equity. And by law they must bankrupt.

    The bank is risky business; and their pricing reflects this fact, particularly when investor's sentiment becomes extremly risk-averse, just like now.

    To demonstrate how extrem risk-aversion Is:

    1)Currently the bank's pricing equation is (using multiple linear regression) cca.
    And othertimes important factors like Earnings, Growth, etc. are absolutely insignificant.

    2)Longterm, the pricing equation is cca.

    This just shows the potential.

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