Undervalued Bank Stocks Before Q1 Earnings: Graham Number Analysis

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Every April, the same thing happens.

JPMorgan reports earnings. CNBC loses its mind. Financial Twitter explodes with "beat/miss" takes that are forgotten by the following Tuesday. And most retail investors either panic or chase — neither of which is a strategy.

Value investors do something different: they do the math before the headlines arrive.

Q1 2026 bank earnings kick off April 14th with JPMorgan Chase and Wells Fargo, followed by Bank of America and Citigroup on April 15th. Before the earnings theater begins, I ran each major bank through Benjamin Graham's formula for intrinsic value — the Graham Number — to see which ones actually deserve a spot in a value portfolio.

Here's what the numbers say.

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Why Bank Stocks and the Graham Number Are a Natural Fit

The Graham Number formula is: √(22.5 × EPS × Book Value Per Share)

Most financial analysts are skeptical of applying the Graham Number to banks because bank earnings are complex — affected by loan loss provisions, net interest margins, and regulatory capital requirements. They're not wrong that it's complex.

But here's why it still works as a starting screen: book value is the single most important metric for bank valuation. Banks are essentially leveraged holding companies for financial assets. What those assets are worth — their book value — is the foundation of what the bank is worth.

The Price-to-Book (P/B) ratio has been the standard bank valuation metric for decades for exactly this reason. The Graham Number just integrates both earnings power and book value into a single ceiling price.

A bank stock trading well below its Graham Number is saying two things simultaneously: its earnings yield is attractive AND its book value is discounted. That's the double margin of safety Graham spent his career chasing.

Let's look at the major banks.

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The Graham Number Analysis: Big 5 Banks

Note: Figures below use most recently reported trailing twelve-month EPS and book value per share. Prices as of early April 2026. These are illustrative calculations for educational purposes — always verify current figures before making investment decisions.

JPMorgan Chase (JPM)

JPMorgan is the undisputed king of U.S. banking. It navigated the 2023 regional banking crisis by acquiring First Republic, extended its deposit lead, and under Jamie Dimon has compounded book value at rates that embarrass most peers.

Key metrics:

• EPS (TTM): ~$18.50
• Book Value Per Share: ~$115
• Graham Number: √(22.5 × 18.50 × 115) = √47,756 ≈ $218
• Current Price: ~$238
• Verdict: Trading ~9% above Graham Number

JPMorgan is the premium franchise and it's priced accordingly. There's no margin of safety here by Graham's standards. The stock is reasonably priced for what you're getting, but it's not a deep-value play. If JPM dropped to $200–$210 on a weak earnings reaction, the math would get interesting.

Wells Fargo (WFC)

Wells Fargo has been in recovery mode since the fake-accounts scandal of 2016 — a decade-long reputational and regulatory rebuild. The Federal Reserve's asset cap (limiting total assets to ~$1.95 trillion) has constrained growth, but that cap is expected to be lifted in 2026. That's the catalyst that makes WFC one of the most interesting bank plays right now.

Key metrics:

• EPS (TTM): ~$5.40
• Book Value Per Share: ~$48
• Graham Number: √(22.5 × 5.40 × 48) = √5,832 ≈ $76
• Current Price: ~$65
• Discount to Graham Number: ~14%
• Verdict: Trading below intrinsic value — margin of safety present

Wells Fargo at $65 with a Graham Number of $76 is a 14% discount to intrinsic value. Add in the potential Fed asset cap removal catalyst, and this is exactly the kind of setup value investors look for: a recovering franchise, an identifiable catalyst, and a price below what the math says it's worth.

Bank of America (BAC)

Bank of America's story in 2025–2026 has been one of rising rate sensitivity. The bank took significant unrealized losses on its long-duration bond portfolio when rates rose in 2022–2023. As rates normalize, those losses reverse — which is a meaningful tailwind.

Key metrics:

• EPS (TTM): ~$3.30
• Book Value Per Share: ~$35
• Graham Number: √(22.5 × 3.30 × 35) = √2,599 ≈ $51
• Current Price: ~$42
• Discount to Graham Number: ~18%
• Verdict: Trading below intrinsic value — solid margin of safety

BAC at an 18% discount to Graham Number is compelling, especially with the bond portfolio headwind becoming a tailwind. Warren Buffett held BAC as Berkshire's second-largest holding for years — not without reason. At these prices, the stock is absorbing a lot of pessimism that may not be fully warranted.

Citigroup (C)

Citigroup is the restructuring story of 2025–2026. CEO Jane Fraser's "Transformation" program has been divesting international consumer businesses and refocusing on institutional clients and the U.S. consumer market. The stock has lagged peers for years. But that's exactly where value investors look.

Key metrics:

• EPS (TTM): ~$7.80
• Book Value Per Share: ~$100
• Graham Number: √(22.5 × 7.80 × 100) = √17,550 ≈ $132
• Current Price: ~$72
• Discount to Graham Number: ~45%
• Verdict: Deeply undervalued by Graham standards — highest margin of safety in the group

A 45% discount to Graham Number on a money-center bank with $2.3 trillion in assets is remarkable. Citigroup trades at roughly 0.72x book value. The reason? The market doesn't believe the transformation will succeed, the return on equity is still below cost of capital, and the restructuring costs are real.

But for a patient value investor? A company trading at 45% below Graham's intrinsic value estimate — with a clear restructuring plan and rising earnings trajectory — is exactly the kind of mispricing Graham built his career finding.

Goldman Sachs (GS)

Goldman's consumer banking experiment (Marcus) is largely being wound down, and the focus is back on its core institutional strengths: investment banking, trading, and asset management. Fee revenue was lumpy in 2025 but improving.

Key metrics:

• EPS (TTM): ~$40
• Book Value Per Share: ~$320
• Graham Number: √(22.5 × 40 × 320) = √288,000 ≈ $537
• Current Price: ~$510
• Discount to Graham Number: ~5%
• Verdict: Roughly fairly valued

Goldman is close to fair value on a Graham Number basis. The premium attached to its brand and earnings power is mostly justified. Not a screaming buy at $510, but not overpriced either. If it dips to $480–$490 on an earnings reaction, that'd push it into value territory.

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The Q1 2026 Earnings Context

Bank earnings are going to be shaped by three forces this quarter:

1. Net Interest Margin (NIM) compression. The Fed cut rates twice in late 2025. Banks earn less on floating-rate assets when rates fall. Expect NIM to be a focus of every analyst call.

2. Credit quality under the correction. The Q1 2026 market correction — driven by Iran War fears and tariff chaos — hit consumer sentiment. Did it affect loan repayment rates? Watch provision for credit losses closely.

3. Investment banking recovery. Deal volumes were suppressed through much of 2024–2025 due to uncertainty. If M&A and IPO activity picked up in Q1, Goldman and JPMorgan should show strong IB revenue.

The key insight for value investors: earnings beats or misses don't change the underlying intrinsic value calculation much. A bank that's already priced at a 40% discount to Graham Number has a wide cushion against disappointing results. A bank already priced at a premium has little room for error.

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Which Bank Passes Graham's Test?

| Bank | Graham Number | Price | Discount | Verdict | |------|--------------|-------|----------|---------| | JPMorgan (JPM) | ~$218 | ~$238 | -9% (premium) | Fair/Overvalued | | Wells Fargo (WFC) | ~$76 | ~$65 | +14% | ✅ Buy Zone | | Bank of America (BAC) | ~$51 | ~$42 | +18% | ✅ Buy Zone | | Citigroup (C) | ~$132 | ~$72 | +45% | ✅ Deep Value | | Goldman Sachs (GS) | ~$537 | ~$510 | +5% | Fairly Valued |

Three of the five major banks pass Graham's test. Citigroup is the deepest value play. Wells Fargo has the clearest near-term catalyst (Fed cap removal). Bank of America is the bond portfolio recovery play.

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Run Your Own Graham Number Analysis

Want to run these calculations on your own watchlist before earnings? The Graham Number calculator at valueofstock.com/calculator does the math instantly — just enter EPS and book value.

For access to our full bank sector screening tool, pre-calculated Graham Numbers for 50+ financial stocks, and margin of safety rankings updated weekly: valueofstock.com Pro is $9/month.

Prefer a one-time purchase? The StockWise6 guide on Gumroad walks through exactly how to apply the 6-point Graham screen to any sector — banks included.

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The Bottom Line

Q1 earnings season is not a slot machine. It doesn't have to be a guessing game about beats and misses.

Value investors use earnings season to confirm or challenge a thesis they already built on fundamentals. If the fundamentals say Citigroup is trading at 45% below intrinsic value, a mildly disappointing quarter doesn't change that math much. It might create a better entry price.

The banks worth watching this week aren't the ones expected to beat estimates. They're the ones that pass the Graham Number test — and offer a margin of safety wide enough to absorb whatever surprises April throws at them.

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Disclaimer: This article is for educational and informational purposes only and does not constitute financial advice. All Graham Number figures are illustrative estimates based on publicly available data. Stock prices change daily. Always conduct your own due diligence and consult a qualified financial advisor before investing. Past performance does not guarantee future results.