The financial services sector is divided into three main categories: banks, insurance companies and investment firms. Within the banking industry, there are investment banks that specialize in providing support for other firms to invest in the financial markets and that provide financing for major corporate acquisitions. Insurance companies earn revenue through collecting policy premiums and through market investments. Investment firms provide investment advisory and portfolio management services to clients. Many firms operate in more than one category. For example, the merger of the Travelers Group insurance company and Citibank led to the creation of Citigroup, which is now involved in all three categories in the sector. Financial services firms account for more than 20% of total stock market capitalization in the United States.

Financial services companies differ from many other companies by virtue of the fact that they are strictly regulated in terms of how they are required to operate and how much cash they must hold at all times. Also, unlike most firms, debt is more like raw material than merely operational capital for financial firms. It is also difficult to precisely define what constitutes such things as capital expenditures for financial service companies. All of these factors that differentiate the sector's businesses from most other businesses present challenges in equity valuation of financial firms. Three of the most common valuation metrics used by analysts evaluating financial firms are price/earnings to growth (PEG) ratio, price to book (P/B) ratio and return on investment capital (ROIC). Of these, the P/B ratio is possibly the valuation method most commonly used by analysts. The average P/B ratio for the financial services sector is approximately 1.8, a bit below the market average.

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