I think Berkowitz is looking at C and thinking a few things:
1.) If C earns a 1% ROA going forward, we are talking about $19 billion of net income annually (on current $1.9 trillion b/s), or, ~$0.65 per share...so at today's $3.30 per share you are paying 5x normalized earnings.
2.) The company is overcapitalized and could write down $20 billion tomorrow and you'd still be an owner at below tangible book.
3.) The company is over reserved with reserves to NPA's of 112%.
4.) If the government pushes the banking industry to create more plain vanilla products, the biggest banks will be the biggest beneficiaries as economies of scale will be more important than they've ever been.
5.) The question that I would have for Berkowitz is how much more does he think C will have to shrink the balance sheet?
Any thoughts?
