European banking stocks have lagged their global peers for years. For example, the iShares Europe Financials (EUFN) ETF crashed more than 30% in 2022 while the SPDR Bank ETF fell around 19%. Here are the cheapest European banks money can buy today.
Credit Suisse’s (SWX:CSGN) stock price has crashed more than 60% this year, making it the worst-performing banking stock in the developed world. What was once a prestigious banking group turned out to be a pariah as it moved from one crisis to the next. Some of his recent scandals relate to Archegos, Tuna Bonds and Greensill.
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Credit Suisse has thus become the cheapest bank in Europe. It has a price-to-book ratio of 0.2, which is well below UBS’s 0.9. The price-to-book ratio is the most common metric for valuing banks since it compares the market value of its shares to the book value of equity. As we wrote in this report, his collapse has been compared to a Lehman moment.
Notably, although Credit Suisse faces many turnaround challenges, its finances are not as bad as expected. For one, it has a Core Tier One ratio of 13.5%, which is better than most other big banks. Therefore, as Citigroup said, Credit Suisse stock price is likely to recover.
The situation at Credit Suisse is so bad that most investors have almost forgotten that Deutsche Bank (NYSE: DB) was in a similar situation a few years ago. After outperforming other banks in 2021, Deutsche Bank has struggled this year, with its stock crashing more than 41%.
Deutsche Bank then became the second cheapest bank in Europe. It has a price-to-book ratio of 0.3. And like Credit Suisse, it has a Tier 1 base ratio of 13.3, which is way above what it’s supposed to have. Still, with the German economy on edge, the stock is likely to continue to struggle.
Standard Chartered (LON: STAN) is the second best performing banking stock in Europe this year after Caixabank, with an increase of more than 26%. Yet StanChart is the third cheapest European banking stock after Credit Suisse and Deutsche Bank.
It has a price-to-book ratio of 0.4 and a core tier one ratio of 13.6. This means that the bank is doing well and has a strong cash position. The main risk for Standard Chartered is its exposure to emerging markets as their economies slow.
Other extremely cheap bank stocks in Europe are Societe Generale, Commerzbank, Credit Agricole and Unicredit. On the other hand, the most expensive in terms of price-to-book ratio are UBS, Lloyds, CaixaBank and BBVA.
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