Bank of America/US Bank Financial Analysis

On the other side the credit risk is the possibility of the money borrowers defaulting on any lease or loan that will lead the banks to undergo a loss on any interest earned as well as the principal amount that was loaned to the borrower. In order to analyze appropriately the financial statement and the value of the bank, these are some of the primary elements that need to be understood. .
             Bank Ratio Calculations and Evaluation .
             There are important valuation values such as the Book/Price values that can be calculated from the balance sheet provided which will help the valuation of the banks. Price to Book ratio is one of the ratios that is important for the valuation of the bank. The price to book ratio shows whether the company's asset value is comparable to the same companies' stock market price. Book value represents the total amount that is likely to be left out if all its assets were liquidated and all its liabilities paid.
             Price/Book ratio = stock price/ (total assets-intangible assets and liabilities).
             PTB ratio (US bank) = 166908/73459 = 2.27.
             PTB ratio (Bank of America) = 149649/72235 = 2.07.
             Both the banks have a price-to-book ratio that is greater than one implying that the stock is overvalued. There is a likely hood therefore that the banks are earning a very good return of their assets. If the companies are growing economically this values should also show the same. The book values however does not offer insight to the banks or companies that are carrying a very huge amount of debts. Debts many a times virtually boosts the price to book ratio by boosting the company's liabilities. The book values of the banks should reflect on the original cost ideally although non-operating issues can impact on the book values. .
             The other important ratio is the price to earnings ratio. This is a ratio that compares the market price to the total earnings per share of the company. By predicting the future earnings of the company the investors are able to predict the expected future dividends or how the stock is likely to appreciate in the future.