HOW THE STOCK MARKET VALUES BANKS
Very few of the world’s largest quoted banks enjoy outstanding stockmarket valuations in mid-August 2021 – but the following are exceptions, with investors valuing these banks at between 20 and 33 times prospective earnings and 1.8 and 6 times book values. For the most part these values reflect the fact that the banks are substantially retail-driven with predictable earnings.
| Highly-rated banks 2022 P/Es 2022 P/Bs |
| First Financial 33.5 3.6 |
| JP Morgan Chase 13.3 1.8 |
| Banque Cantonale Vaudoise 20.4 2.0 |
| Al Rajhi Bank 20.5 4.3 |
| Capitec 27.7 6.0 |
| CBA 21.4 4.4 |
| HDFC 23.0 3.6 |
| ICICI 24.0 3.0 |
| Kotak Mahindra Bank 33.3 3.7 |
| BCA 21.3 3.5 |
Source: Credit Suisse, August 2021
In sharp contrast, the following are the P/E ratios and P/B values for a series of the world’s big banks, most of which are universal with dominant corporate and investment banking activities. P/E ratios for the vast majority are less than 10 and P/B values are for the most part well below book values.
| Lower-rated banks 2022 P/Es 2022 P/Bs |
Bank of America 13.3 1.4 |
| Citigroup 9.5 0.7 |
| US Bancorp 13.0 1.7 |
| Wells Fargo 14.4 1.1 |
| Toronto-Dominion 11.8 1.6 |
| BNP 8.0 0.6 |
| Credit Agricole 7.9 0.6 |
| Societe Generale 6.7 0.4 |
| Deutsche Bank 8.8 0.4 |
| BBVA 9.5 0.8 |
| Santander 6.6 0.6 |
| Credit Suisse 6.9 0.5 |
| UBS 9.3 0.9 |
| Barclays 7.2 0.5 |
| Lloyds 6.8 0.7 |
| NatWest 8.8 0.6 |
| Standard Chartered 9.5 0.4 |
Source: Credit Suisse, August 2021
While low interest rates and competition from FinTechs are undoubtedly factors here, it also seems likely that investors do not see a bright future for universal banks that aspire to do everything.
Even BBVA, the Spanish bank famous for its digital transformation, is valued at less than 10 times prospective earnings and at only 80 percent of its book value.