Finance

Elaine He oversees Bloomberg Gadfly's data visualization work in Europe and also pursues her own columns combining business and markets coverage. Before joining Bloomberg, she was a graphics editor at the Wall Street Journal and the New York Times.

Edward Evans is a managing editor with Bloomberg Gadfly. He is former managing editor for European finance at Bloomberg News.

It's been a lost decade for investors in the world's banks. For Europe's lenders in particular, the wounds are far from healed.

Still Lagging
Europe's lenders trail their U.S. peers
Source: Bloomberg
Note: Performance since Aug. 8, 2007

Just as in the U.S., the region's banks took a battering as markets froze over and losses from toxic loans mounted. While the U.S. moved quickly to recapitalize its lenders and allow them to purge their balance sheets of the worst debt through the Troubled Asset Relief Program, Europe didn't. Add in a sovereign debt crisis, an investors remained suspicious about European lenders' balance sheets long after the crisis abated. 

Credibility Gap
European banks still trade at a discount to the book value of their assets
Source: Bloomberg

Now, firms are safer -- or, at least capital levels have increased and firms are less reliant on short-term funding. Look at how euro zone banks' use of money-market funds has reduced.

Remember These?
Euro zone banks are relying less on money market funds
Source: Bloomberg Intelligence

The amount of money banks lend relative to their deposits has also declined.

Loans to Deposits
Euro zone banks' lending as a proportion of deposits has shrunk since the crisis
Source: Bloomberg Intelligence

But revenue hasn't recovered. While the European Central Bank has rushed to offer cheap funding to lenders, record-low interest rates mean the rate they can charge consumers for new loans or mortgages has also been squeezed.

Under Pressure
The rate banks charge on new mortgages or consumer loans has fallen since the crisis
Source: Bloomberg Intelligence

Costs as a proportion of revenue remain stubbornly high.

Expensive Expenses
European banks are struggling to reduce costs
Source: Bloomberg Intelligence

Return on equity, a measure of profitability, is a fraction of what it used to be.

Europe's banking industry may be safer for taxpayers, but investors have had little reason to return to it since the crisis. There are signs lenders are starting to get to grips with their bad debt problem, and a rebounding economy should, in time, prompt the ECB to raise rates -- something that would finally provide some relief for the region's banks.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the authors of this story:
Elaine He in London at ehe36@bloomberg.net
Edward Evans in London at eevans3@bloomberg.net

To contact the editor responsible for this story:
Jennifer Ryan at jryan13@bloomberg.net