Editorials

Benjamin Graham taught liquidation-value investors to look through the noise of accounting conventions to what actually matters: the hard residual value of a business if it were dissolved today. For asset-intensive businesses like banks—institutions that hold billions in tangible assets on their balance sheets—this principle leads directly to a metric that conventional equity multiples often obscure: tangible book value per share.

Tangible book value strips goodwill and other intangible assets from shareholders' equity to approximate what a company's truly hard assets would support in value. It is not an accounting standard with a single authoritative definition. Rather, it is a conservative reframing of the same equity figure—removing from the numerator whatever was not on the balance sheet before an acquisition. For banks especially, where balance sheets hold credit assets, deposits, securities portfolios, and physical infrastructure, the gap between ordinary book value and tangible book value often flags whether management acquired growth through deal-making or organic earning power.

Bank of America (BAC), the largest U.S. bank by assets, offers a clear worked example. As of June 30, 2026, BAC's reported stockholders' equity stood at $301.1 billion. From that figure, we must subtract:

• Goodwill: $69.0 billion
• Intangible assets (excluding goodwill): $1.8 billion

That leaves tangible equity of $230.3 billion.

With approximately 6.9 billion shares outstanding (derived from Moatkeep's computed market cap of $433.2 billion and a stock price near $62.60), we can compute:

• Book Value Per Share: $43.06
• Tangible Book Value Per Share: $32.93

The gap is not trivial. Goodwill and intangibles account for $70.8 billion, or about 23.5% of reported equity. Put another way, BAC's TBVPS of $32.93 is roughly 24% lower than its BVPS of $43.06.

1. Book multiples can flatter acquisitive companies

When a large bank acquires a regional peer, the deal typically creates goodwill equal to the premium paid over the acquired company's net book value. That goodwill sits on the combined balance sheet as an asset—but it represents nothing more than the price paid, not earning power or tangible capacity.

A bank trading at 1.4x ordinary book value may look cheaper than it is if half of its book value is goodwill. BAC trades at 1.44x book value, which looks modest—until you note that it trades at 1.88x tangible book value. The story changes.

2. Liquidation value, not accounting value

Tangible book value approximates what a bank's hard assets (loans, securities, deposits, premises) would be worth if the institution were unwound. Goodwill, by contrast, walks out the door the moment a customer or counterparty leaves. In a stress scenario—whether systemic financial distress or a sharp reversal in credit conditions—tangible book value is a truer floor than reported book value.

For Graham-style investors, this distinction is the entire point. You're not paying for intangibles or franchise value (though those may exist). You're paying for the capacity to hold and deploy capital.

3. Comparability across peers

Because banks have no single authoritative definition for tangible book value, comparing two banks requires checking exactly what each excluded. Some strip only goodwill; others also deduct indefinite-lived intangibles (customer relationships, brands). A bank built organically may have far less goodwill than one assembled through acquisitions, even if both have similar asset quality and capital structures.

BAC's $69 billion goodwill base largely reflects its acquisition history, particularly the 2008 purchase of Merrill Lynch. Other large banks assembled differently will show different gaps. Knowing this gap before comparing price-to-book multiples prevents you from confusing acquisition-driven growth with operational performance.

Tangible book value is not a GAAP or SEC-defined metric. No regulator mandates a single formula. Different banks—and different analysts—treat certain items differently:

• Some exclude only goodwill.
• Others exclude goodwill and core deposit intangibles (the premium paid for a customer base).
• Still others exclude both, plus certain deferred tax assets tied to goodwill write-downs.

When you see a bank report "tangible equity" or "tangible common equity," dig into the footnotes. The number you're seeing may differ from the version used by another analyst, or by management of a different institution.

For BAC, Moatkeep's computation is transparent: we subtracted goodwill and other intangible assets (net) from stockholders' equity. No adjustments beyond those line items. That clarity is what makes the metric useful for comparison.

Asset-heavy, low-margin businesses: Banks, insurers, finance companies. Tangible book value is critical because intangible premiums are harder to defend and value is concentrated in hard assets.

Post-acquisition integration: A company that has made a string of acquisitions at high multiples will carry a large goodwill base. As an investor, you're betting not on synergy realization, but on the management's ability to earn back what was paid. Tangible book value frames the question honestly: what is left if the deal creates zero value?

Cyclical downturns: In a recession, goodwill is often the first write-off target. Tangible book value tells you what shareholders might reasonably expect to recover if credit conditions deteriorate sharply.

Value and deep-value screening: If you're looking for businesses trading below intrinsic liquidation value, tangible book value is closer to that floor than reported book value. A bank at 1.2x tangible book may be genuinely cheap; at 1.2x reported book, it could be misleading if goodwill is large.

For any financial institution:

Tangible Equity = Shareholders' Equity − Goodwill − Intangible Assets (net)

Tangible Book Value Per Share = Tangible Equity ÷ Fully Diluted Shares Outstanding

All line items come directly from the balance sheet (Form 10-Q or 10-K). No estimation required. The metric is as objective as any number pulled from a filing.

From there, compare tangible book value per share to:

• The company's historical trading range (intrinsic value should be anchored here)
• Peers in the same business (adjusting for differences in intangible base and capital structure)
• Tangible retained earnings power (can the company grow tangible equity faster than the cost of capital?)

Before buying a bank or asset-heavy business on a "cheap" book multiple:

1. Compute tangible book value per share using the template above.
2. Calculate the price-to-tangible-book multiple. Is it materially higher than price-to-book? If so, goodwill is large relative to equity.
3. Ask where the goodwill came from. Organic growth (rare, adds little goodwill) or acquisitions (common, goodwill often overstated)?
4. Inspect credit quality and capital ratios. Tangible book value matters most if the company is well-capitalized and loan losses are manageable.
5. Compare to tangible book value of peers. Does this company trade at a premium or discount to tangible book relative to competitors? Is that premium justified by superior capital generation, lower credit risk, or superior management?
6. Test for earnings power. Return on tangible equity (net income ÷ tangible equity) should exceed the cost of capital over a full cycle. If it doesn't, the goodwill may be permanently impaired.

Goodwill and intangibles are not worthless. A bank with a strong customer franchise, a durable deposit base, and management expertise may well be worth a premium to tangible book value. But that premium must be earned through superior capital generation, not assumed to exist just because it sits on the balance sheet.

Tangible book value per share is not a replacement for intrinsic value analysis. Rather, it is a conservative starting point—the hard-asset foundation on which everything else is built. For a bank like BAC, with $69 billion in goodwill, the difference between $43.06 of book value per share and $32.93 of tangible book value per share is not academic. It is the precise amount by which shareholders are betting on management's ability to sustain a franchise premium.

That bet may well pay off. But it is worth understanding what you're actually betting on, and why the metric—and the gap—matters.