In The Press… Why do banks suffer from heavy discounts on the stock markets?

Patrick Jenkins, FT, Wednesday, December 5, 2023:

In this interesting article, Patrick Jenkins wonder why price-to-book ratios are generally rather low in the European banking sector. He argues that under a favourable scenario, “Europe’s banks may one day make it back to book value, finally expun­ging the zom­bie phe­nomenon”.

In a letter to the FT, that was published, we added that banks’ high cost of cap­ital may also be related to share­hold­ers’ know­ledge that they would be the first vic­tims of zeal­ous reg­u­lat­ors in case of prob­lems.

Indeed, we have often stressed how worried we are by the current approach of bank resolutions and how it may trigger “death spirals”  in share prices.

In the following paper, we argue for a radical new approach in the way we deal with weak banks.