conix
8年前
The Big-Bank Bloodbath: Losses Near Half a Trillion Dollars
The Wall Street Journal
By David Reilly
Big banks are nearly half a trillion dollars in the hole.
Since the start of 2016, 20 of the world’s bigger banks have lost a quarter of their combined market value. Added up, it equals about $465 billion, according to FactSet data.
Brexit isn’t all to blame. True, bank stocks have plummeted since the U.K. voted last month to leave the European Union. But they have been losing value since the start of the year, when a group of factors—the Chinese economy, the path of U.S. interest rates, oil prices—weighed on the markets.
More than pride is at stake. Sharp share-price falls will make it much more difficult, and expensive, for banks to raise capital if that is what is ultimately needed to shore up their balance sheets.
Just as bad, a serious decline in market value can breed inaction among bank executives. Instead of selling equity when they can, executives may wait for share prices to recover, only to find themselves in a worse situation as stocks drop even further.
Another potential worry: As bank share prices decline, employees get antsy. Compensation packages that include stock options or restricted stock suddenly become a lot less attractive.
To get a handle on the severity of 2016 for banks, The Wall Street Journal examined the biggest U.S., U.K. and Swiss banks, some of the biggest European ones, as well as the biggest bank in each of China and Japan.
The group included: J.P. Morgan Chase & Co. Wells Fargo & Co., Bank of America Corp., Citigroup Inc., Goldman Sachs Group, Morgan Stanley, Royal Bank of Scotland PLC, HSBC Holdings, Barclays PLC, Standard Chartered PLC, UBS Group AG, Credit Suisse Group AG, BNP Paribas SA, Credit Agricole SA, Société Générale SA, UniCredit SpA, Deutsche Bank AG, Banco Santander SA, Industrial and Commercial Bank of China Ltd. and Mitsubishi UFJ Financial Group Inc.
The biggest market-value losers, in dollar terms, so far this year: Italy’s UniCredit has lost nearly two-thirds of its value; Royal Bank of Scotland has fallen around 56%; and Credit Suisse, Deutsche Bank and Barclays have all about halved.
Those who have lost the least: J.P. Morgan Chase and Industrial and Commercial Bank of China, which are both down about 10%. In local-currency terms, share prices for all 20 banks are down year to date, except Standard Chartered, which is flat.
Despite such gloom, many banks say they don’t need to raise capital. Indeed, in the U.S. at least, the Fed’s recent bank stress tests asserted that big banks can weather particularly bad market storms. The Fed also approved plans at all the largest U.S. banks to return some capital to shareholders.
Valuations show investors aren’t feeling so confident. UniCredit, for instance, trades at about 21% of book value, a measure of a bank’s net worth, according to FactSet. Deutsche Bank trades at about 26%, or where it was during the darkest days of the financial crisis.
In fact, among the group of 20 big banks only one bank—Wells Fargo—trades at a premium to its book value. Only one other, J.P. Morgan Chase, trades near book value.
A bank trading below book value can signal that investors have questions about capital strength. It can also show markets are worried about future profitability and a firm’s ability to generate returns that exceed its cost of capital.
Plunging bond yields around the globe have exacerbated the latter concern by pressuring banks’ profit margins.
The fact that some banks are trading at less than half their book value flags even deeper concerns. Among the likely issues: A brewing battle within the EU over rules curtailing governments’ ability to bail out banks and whether those could be put on hold.
All of this has many once-mighty banks looking like shadows of their former selves. Deutsche Bank, Germany’s national banking champion and still a big player on Wall Street, now has a market value that in dollar terms is less than that of SunTrust Banks Inc., the regional U.S. bank focused on the Southeast. And the market values of UniCredit, Deutsche Bank and Credit Suisse combined wouldn’t equal that of Goldman Sachs—itself down about 20% this year.
Write to David Reilly at david.reilly@wsj.com
conix
8年前
Barclays, RBS, Lloyds Slammed by Second Day of Brexit Fallout
June 27, 2016 20:39 GMT
barclays BCS
Barclays PLC (NYSE:BCS) is one of the British banks hit the hardest by last week’s historic Brexit vote, with its shares trading 37 percent lower than the stock’s price before it was announced that the United Kingdom would leave the European Union. The unexpected voting results immediately sent global markets into a chaotic state of volatility, and British banking groups – in particular – took the blunt of the impact.
The main sell-offs in the market on Friday, and continuing into Monday, are in the European financial sector – and Britain’s big banks are getting the worst of it. Both Barclays and Royal Bank of Scotland Group Plc (NYSE:RBS) had their stock halted today, after the banks’ shares dropped to their lowest levels since the financial crisis. Once their shares fell more than eight percent, circuit breakers were triggered to stop all trading of the common shares.
Barclays is down 21 percent since the market open today, RBS is down by 12 percent and Lloyds Banking Group plc (NYSE:LYG) has plunged by 18 percent. Despite the various British banks’ stock gaining in value in the days leading up to the surprising vote, the voters’ decision drove the market values of these giant financial institutions 13 percent lower – on average – in a matter of days.
At least six Wall Street analysts have slashed their ratings on the three banks mentioned above. Jefferies, for instance, cut its earnings prediction for Barclays, RBS and Lloyds into 2018, expecting “tectonic plate shifts in European bank investing.” Jefferies’ Joseph Dickerson, while not giving any predictions on the details of these shifts, said that the current state of uncertainty about Britain’s future “creates an information vacuum and is likely to impair investment appetite in the U.K.”
U.K. banks were not the only ones touched by the ripple effects of the historic Brexit. Deutsche Bank (NYSE:DB), Germany’s universal banking giant, is down six percent. Switzerland-based Credit Suisse (NYSE:CS) is trading nearly nine percent lower today, and UBS (NYSE:UBS) – also a Swiss banking group – has dropped by more than eight percent since the market open this morning.
The hysteria surrounding the Brexit can be felt almost everywhere. European stock indexes dropped yet again today. The FTSE 100 fell by over three percent, and major averages in Germany, Italy and France sunk by more than two percent. The sell-off was not contained within Europe, however, as the DOW is down 1.65 percent and the S&P 500 has tumbled by just under two percent.
The impact on the British pound (GBP) is also a major factor in the beating that British banks have taken since the Brexit results sunk in. The UK’s currency has dropped another four percent to just $1.32 today. According to George Soros, who forecasted a drop in the value of the GBP if the voters approved leaving the European Union, is warning that the whole EU is going to unravel.
Some, however, are embracing a calmer outlook. The British Chancellor of the Exchequer, George Osborne, attempted to reassure Britons as the hectic market absorbed the Brexit announcement. In his first remarks after the voting results came in, Osborne said today: “You should not underestimate our resolve. We were prepared for the unexpected.”