Posted on Feb 15, 2019 2021 at 8:07Updated Feb 15, 2019 2021 at 8:23
You have analyzed the value creation of European banks for 20 years. What conclusions do you draw?
We looked at the three components of value creation: stock market price, dividend and valuation to book value ratio. In twenty years, the total return to shareholders, the sum of price increases and dividends, has been divided by four. It went from 12% on annual average in the “good years”, between 2002 and 2006, to 3% in the last period from 2012 to 2019. Before the financial crisis, the total return for shareholders was focused on an increase share price. Today, it is linked almost exclusively to the dividends paid to them. Banks have become “yield stocks”. The price-to-book ratio has been less than 1 since 2008 for more than 90% of European banks and around 0.5 for banks in the euro zone.