European bank stocks have lagged their global peers for years. For example, the iShares Europe Financials ETF (EUFN) has crashed by more than 30% in 2022 while the SPDR Bank ETF has dropped by about 19%. Here are the cheapest European banks that money can buy today.
Credit Suisse (SWX: CSGN) stock price has crashed by more than 60% this year, making it the worst-performing bank stocks in the developed world. What was once a prestigious banking group has turned out to be a pariah as it has moved from one crisis to the next. Some of its recent scandals are on Archegos, Tuna Bonds, and Greensill.
As a result, Credit Suisse has become the cheapest bank in Europe. It has a price-to-book ratio of 0.2, which is much lower than 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 with the book value of equity. As we wrote in this report, its collapse has been compared as a Lehman moment.
Notably, while Credit Suisse faces numerous turnaround challenges, its financials are not as bad as expected. For one, it has a Core tier one ratio of 13.5%, which is better than that of most other large banks. Therefore, like Citigroup said, there is a likelihood that Credit Suisse share price will 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 by over 41%.
Deutsche Bank has then become the second cheapest bank in Europe. It has a price-to-book ratio of 0.3. And like Credit Suisse, it has core tier one ratio of 13.3, which is much higher than what it is supposed to have. Still, with the German economy on edge, there is a likelihood that the stock will continue struggling.
Standard Chartered (LON: STAN) is the second-best performing bank stocks in Europe this year after Caixabank as it rose by more than 26%. Yet, StanChart is the third cheapest European bank 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 both doing well and is in 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 Société Generale, Commerzbank, Credit Agricole, and Unicredit. On the other hand, the most expensive ones by price-to-book ratio are UBS, Lloyds, CaixaBank, and BBVA.