banks are a bugger because they tend to provide equity...

banks are a bugger because they tend to provide equity stability. also if they take a real dip and Govts they have shown a willingness now to stop dividends.
luckily Au banks have prepared for years for this last share market spasm... our banks are very safe but yes is nasty as banks worry Govts.

Few people really understand that, in essence, banks are probably the most financially leveraged enterprises in existence, which is why when their assets (i.e., loans) behave they make a poultice, but it takes things go just a little bit awry for the equity base of the banking system to get blown up.

Which is why, whenever there is a financial crisis, bank share prices get hit so hard - even seemingly well-capitalised ones - and also why some banks quite quickly go belly-up.

Which is why I've never been able to understand how any bank can be valued at 14x or 15x (let alone in the high teens, which is where CBA has been priced at times).

Frankly, given the innate risks involved in fractional lending, I think that the most at which even a premium bank such as CBA should be capitalised is 12x earnings, and for poorer-quality banks (i.e., all the others in Australia), the most I'd pay for any bank - other than CBA - is 10x.

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