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Citigroup Inc. Message Board

  • talovoy talovoy Sep 11, 2008 6:21 PM Flag

    Banks are not supposed to be growth companies.

    Where did everyone get the idea that banks are supposed to be booming growth drivers? Their only real function is to store and transport cash. They ought to trade at about the same type of PE as a utility or transportation company.

    It's only been in the last decade or so, while the US has been in the midst of its money-printing orgy, that somehow people started expecting them to grow earnings by 15 or 20%, which they have done by using fraud to create paper wealth.

    You'll know that the "worst is over" when all the major banks are trading at about an 8 PE, their earnings growth is in a tight correlation with GDP growth, and they have yields about half that of Treasuries.

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    • ["They ought to trade at about the same type of PE as a utility or transportation company."]

      Unless they are in the credit card business.That's a whole new financial shoe to drop in the 4th quarter. Citi and Capital One will be big players in that debacle. People are using credit cards more for higher costing staples and becoming unemployed.

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