CAGR, or compound annual growth rate, is the single annual rate that would turn a bank’s starting value into its ending value over a specified period. It is useful for summarizing growth, but its meaning depends on what is growing: earnings per share, tangible book value per share, deposits, assets, or the stock price. Those measures are not interchangeable, and none alone tells you whether the stock is a good investment.
How CAGR is calculated
The formula is:
CAGR = (ending value ÷ starting value)(1 ÷ number of years) − 1
For example, a measure that rises from 100 to 144 over four years has a CAGR of about 9.6%. That is the constant annual compound rate that connects those endpoints. It does not mean the measure actually increased by 9.6% in each of the four years.
Use elapsed years between the dates, not simply the number of annual observations. A series with values for 2019 through 2025 spans six years, even though it contains seven calendar-year observations.
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What is growing matters more than the label
A bank can report growth rates for several different measures. Each answers a different question:
- EPS CAGR: How quickly earnings per share increased. Check whether the figure is reported or adjusted and whether the share count changed through issuance or repurchases.
- Tangible book value per share CAGR: How quickly tangible equity value per share increased under the company’s stated definition. Definitions and adjustments matter, particularly when comparing banks.
- Asset or deposit CAGR: How quickly the balance sheet or funding base expanded. Growth may reflect acquisitions as well as organic business expansion.
- Share-price CAGR: How quickly the quoted share price changed between two dates. It excludes dividends unless the calculation explicitly uses total return.
A bank’s earnings or balance-sheet CAGR is not its shareholder return. Stock performance also depends on the price investors were willing to pay, valuation changes, and dividends.
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A bank’s reported CAGRs in context
Customers Bancorp’s April 15, 2026 shareholder letter reports the following changes from 2019 to 2025. These are company-reported figures for that period, not projections:
| Measure | 2019 | 2025 | Reported CAGR |
|---|---|---|---|
| Total assets | $11.5 billion | $24.9 billion | 14% |
| Total loans | $10.1 billion | $16.8 billion | 9% |
| Total deposits | $8.6 billion | $20.8 billion | 16% |
| Core EPS | $2.35 | $7.61 | 22% |
| Tangible book value per share | $26.17 | $61.77 | 15%+ |
Customers Bancorp identifies core EPS and tangible book value per share as non-GAAP measures and provides peer-set and measurement-date qualifications in the letter. Treat those definitions and qualifications as part of the figures, rather than assuming the measures are directly comparable with another bank’s figures. Customers Bancorp, 2026 Annual Review Letter to Shareholders.
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How to judge whether the growth is meaningful
Match the measure and reporting basis
Compare EPS with EPS, deposits with deposits, and book value per share with the same per-share measure. Confirm whether each figure is reported under the same accounting basis or uses similar adjustments. A “core” or otherwise adjusted figure may exclude items included in reported results.
Align the dates and inspect the annual path
Use the same start and end dates and the same elapsed period for each bank. Then look at the annual results between the endpoints. A high CAGR can conceal a sharp contraction followed by a rebound, or a step-change from an acquisition. The endpoint formula cannot distinguish those paths.
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Separate organic growth from balance-sheet expansion
Asset, loan, and deposit growth describe scale, not necessarily the quality or profitability of that growth. Check company disclosures for acquisitions and other major changes, then consider credit quality and capital information alongside the growth figure.
Put profitability and leverage in view
Return on equity (ROE) is earnings relative to book equity. The Reserve Bank of Australia describes it as a widely used bank profitability measure, while noting that it reflects both asset profitability and leverage. A high ROE therefore needs context: it can reflect stronger profits, more leverage, or both. Reserve Bank of Australia, “Returns on Equity, Cost of Equity and the Implications for Banks” (March 2017).
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Keep growth separate from valuation
CAGR does not establish whether a bank stock is cheap or expensive. The RBA’s framework links bank price-to-book ratios to ROE and the cost of equity, and explains that goodwill accounting can complicate comparisons. In an Australian merger example discussed in its 2017 article, combined shareholders’ equity included $1.5 billion of goodwill; the combined entity’s ROE immediately halved and its price-to-book ratio fell from 2.2 to 1.3. That historical example illustrates an accounting comparison issue; it is not a forecast or a general rule for other banks.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.A practical comparison checklist
- Measure: Identify whether the rate covers EPS, tangible book value per share, deposits, assets, or stock return.
- Period: Record the starting and ending fiscal years and calculate the number of elapsed years.
- Basis: Note reported versus adjusted figures, accounting definitions, and share-count effects.
- Growth quality: Review annual results and distinguish organic expansion from acquisitions or a rebound.
- Bank economics: Read ROE with leverage, capital, and risk disclosures in view.
- Valuation: Consider price-to-book in relation to profitability and cost of equity; growth alone does not establish fair value.
For a company-specific definition of reported measures, use that bank’s filings and investor disclosures. For example, Bank of America’s 2025 Form 10-K, filed in February 2026, presents company-specific ROE, equity, and per-share information; use the filing’s definitions when interpreting its figures.
What CAGR can and cannot tell you
CAGR is a compact way to compare endpoint growth when the measure, dates, and calculation basis match. It cannot show year-to-year volatility, identify the cause of growth, measure credit or capital risk, or tell you what return shareholders will earn in the future. Use it as a starting point for analysis, then read the annual results and valuation context behind it.
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