Banks’ falling book value could invite activists

Pedestrians pass in front of a Bank of America branch in New York City.
Scott Mlyn | CNBC

Trading below tangible book value was once considered a harbinger of doom for banks, even the stock market itself. Now, it could instead spell trouble for banks' management teams.

A group of U.S banks including Goldman Sachs, Morgan Stanley and Bank of America saw shares drop by at least 8 percent to begin this year. Each bank also trades below tangible book value, or the net value of the company less intangible assets and goodwill.

With the stocks' value dipping beneath book value and earnings reports from U.S. banks due this week and next, underperforming banks could see activist investors clamoring for leadership changes or for spinouts at firms posting disappointing returns.

"If valuations stay depressed as they are it creates incentive for banks to unlock value," CLSA banks analyst Mike Mayo said. "Shareholders have every right to push for a credible plan."