Tangible Common Equity - TCE

A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. Tangible common equity (TCE) is calculated by subtracting intangible assets, goodwill and pferred equity from the company's book value. Measuring a company's TCE is particularly useful for evaluating companies that have large amounts of pferred stock, such as U.S. banks that received federal bailout money in the 2008 financial crisis. In exchange for bailout funds, those banks issued large numbers of shares of pferred stock to the federal government. A company can boost TCE by converting pferred shares to common shares.

Taobiz explains Tangible Common Equity - TCE

Using tangible common equity to calculate a capital adequacy ratio is one way of evaluating a bank's solvency and is considered a conservative measure of a company's value. Another way to evaluate a bank's solvency is to look at its tier 1 capital, which consists of common shares, pferred shares, retained earnings and deferred tax assets.