Europe’s Lowest “Price to Book” Banking Stocks

The most discounted 15 largest European banks (Latribune)
According to data provided by Capital IQ, French banks display the lowest “price to book” in Europe. That is the fact. Despite the upturn in the banking sector since early October, the banking shares have never been so undervalued. In absolute terms, the value of the shares of Societe General like Credit Agricole, quoted last week below its level of March 9, 2009, corresponding to the low point reached by the European markets, six months after the collapse of Lehman Brothers. Since the beginning of the year, the Euro Stoxx Banks has made more than 35%, bringing to nearly 80% compared to the summer of 2007, when the European indices evolved to historical highs.

Royal Bank of Scotland Group plc (ADR) (NYSE:RBS)

In fact, the value of bank assets has historically not been taken into account in the share prices. Before the financial crisis of 2008, the firm AlphaValue found that the European banks listed in the stock exchange are worth 1.65 times their net asset value (price to book) .Despite the fact that the 300 billion Euros were spent on recapitalization of European banks between 2007 and 2010, the “price to book» of the Stoxx 600 banks fell to 0.6. Within three years, the collapse of Lehman Brothers on September 15, 2008, coupled with the bursting of the sovereign debt crisis in the euro area has significantly degraded the risk profile of the players in the profession. Investors have now started to integrate disaster scenarios in their calculation of banking shares.
Societe Generale, announced the elimination of dividends for 2011 as, on Tuesday, the publication of quarterly results of Societe Generale was disappointing.

Top 15 European Banks, ranked by their stock market capitalization

Institution                 Price to book ratio     Stock market capitalization
Intesa Sanpaola                           0.25                            14.6
Credit Agricole                            0.28                             12.7
Societe Generale                         0.28                             13.1
The Royal Bank of Scotland      0.33                             28.2
Barclays                                        0.42                             25
BNP ¨Paribas                               0.49                             37.1
Deutche Bank                              0.49                             25.4
Lloyds                                            0.54                             22.1
ING                                                0.56                             21.8
Banco Santander                         0.71                             48.8
BBVA                                             0.76                             29.5
UBS                                                0.79                             33.2
Credit Suisse                                0.83                             22.5
DnB NOR ASA                             0.91                             13.6
HSBC                                             0.95                             109.3

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