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UniCredit Bombshell Shouldn’t Be the Last One: Jonathan Weil

Everyone in the world who pays any attention to the financial markets seems to know that the balance sheets of European banks are a joke. All you have to do is compare the stock prices of these companies with the book values on their balance sheets to see that.

On average the shares of the 32 companies in the Euro Stoxx Banks Index trade for about 44 percent of book value, or common shareholder equity, according to data compiled by Bloomberg. Put another way, a typical large euro-area bank would have us believe its net assets are worth more than twice what the stock market says the bank is worth. The problem is the companies’ numbers can’t be trusted, and it’s been this way for years.