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A few points to argue:

a)Banks have historically been valued as a multiple of book. To ignore book value (which will need to be done to avoid the issues with all of the trash still on their balance sheets) and focus on "normalized" earnings THREE years" into the future is nonsense. It is using a "its different this time around" approach. Much as the dot.com crew wanted you to forget about earnings in tech companies and focus solely on sales and/or "eyeballs".

b)Even if one were to buy the "normalized earnings" argument, if one had to wait till 2012 to ascertain whether these earnings would actually materialize or not, and take into consideration current earnings, the macro outlook and the risks involved, then the discounting factor that should prudently be applied to those earnings that "may" appear 3 years into the future (coming off of a massive credit, lending and risky asset bubble - you know, the stuff that banks based their entire businesses on) should be prohibitively high. Think about it as if you were spending your own money to acquire these companies in a private transaction. How would you value them in order to clear a profit of net 10% per annum, post tax???