Europe’s Tumbling Lenders Lose Almost Half Their Value in a Year

  • Deutsche Bank, Commerzbank retreat to fresh record lows
  • Analysts estimate bank earnings will shrink 18% in 2016

European Banks Report Card, How Are They Doing?

Europe’s banking shares are back in the limelight for all the wrong reasons.

On Tuesday, the second day of trading since stress tests showed almost all euro-area lenders would have sufficient capital to cope with a crisis, Germany’s Commerzbank AG and Deutsche Bank AG tumbled to fresh record lows, dragging a Stoxx Europe 600 Index gauge of their peers towards its biggest two-day loss in almost four weeks.

“I don’t want to say it, but it’s Armageddon for the banks,” if the index drops any further, said Joe Tracy, head of continental European equities at Svenska Handelsbanken AB in Stockholm.

Analysts forecast bank earnings will drop 18 percent this year, behind only energy and mining companies as the Stoxx 600’s biggest-contracting industry group. HSBC Holdings Plc, Societe Generale SA, ING Groep NV and UniCredit SpA are all scheduled to report results on Wednesday, followed by Royal Bank of Scotland Group Plc on Friday.

The charts below show the extent of the slump hitting European banks this year:

1. Market Cap Slump

As recently as July last year, shares of European banks were worth the most since 2008. They’ve lost about 40 percent of their value since then, or more than half a trillion euros ($560 billion), data compiled by Bloomberg show. The losses are greater than the total value of Italy’s entire stock market.

2. Cheapest Ever

On a price-to-book basis, European banks are trading near their cheapest-ever valuations relative to the Stoxx 600, according to data compiled by Bloomberg going back to 2005. The same is true when compared with a gauge of U.S. banks.

3. Stock Selloff

Credit Suisse Group AG has fallen 51 percent in 2016, while Deutsche Bank and Commerzbank are down at least 45 percent. About two-thirds of Europe’s largest banks have lost more than 20 percent this year alone.

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