Here’s an interesting little table from the banking team at Citigroup.
That’s right, Standard Chartered, HSBC and Santander have exceeded their historical equity market capitalisation peaks, according to Citi.
Now some people might find that surprising, but not Citi analyst Ronit Ghose:
The common theme among these three leading banks is that they are European-listed international banks with dominant emerging market franchises — Standard Chartered and HSBC in Asia in particular, Santander in Latin America.
A simple reading of the data may be to argue that the banks with peak market capitalisations are unattractive. But if their earnings power and business models have not been fundamentally affected by the crisis — true for a Standard Chartered — one could say the peak valuations are fair.
Which is a reasonable argument, as long as you don’t subscribe to the Albert Edwards school of thought on China, or believe Spanish banks are hiding their losses.
But what about the Nordic banks on this list, do they really deserve market values so close to historic highs? And what about Barclays?
Unfortunately Ghose doesn’t touch on the British bank, but he has this to say about the Scandi banks:
A quick look at earnings expectations illustrates our point: consensus earnings for Nordea in 2011 is c60% of its 2007 reported level, and it is similar for SHB. Nordea’s 2011 earnings relative to 2007 will be about half Santander’s — but market cap relative to peak is similar.
We believe the market capitalisation of these Nordic leaders have been supported by their local safe haven status, relative to say a Swedbank or a Danske Bank which have both lost half their market value from the peak. In addition, stake building has probably supported Nordea’s valuation.
And here are a couple of other data points from the report.
The European bank sector market capitalisation today is about one trillion euros or half its peak level (2Q 2007). Most European banks, including many of the larger French, Italian and Investment banks, are between 40%-60% of peak capitalisation levels. European banks are c15% of total European market capitalisation – in line with their 10 year average.
Oh, and a table of Europe’s banking laggards.
Related link:
Santander’s Brazilian job – FT Alphaville