Welcome to yet another report on the state of the banking system – this time focused on the European continent. On Wednesday we covered US banks in light of the recent and still ongoing stress in the sector, but while the epicenter of what developed into a crisis is found in the US, European banks have suffered in its wake.

Read along as we give a sitrep on the state of the peers east of the Atlantic.

Red across the board

Of all the banks in the below table, not one was up on Friday. On average, their stock price was down 5%(!) by the time of writing with Deutsche Bank leading the landslide. Ouch! Contrary to their American peers, all but one (UBS) is trading at a price below its book value.

Turning to the tangible common equity (TCE), the European banks have lessor of a margin (5%) than the US banks put under the scrutinous loop on Wednesday (6.25%). This TCE is a measure of a bank’s physical capital and hence a measure for its ability to deal with potential losses – the adequacy of capital. 

The common equity tier 1’s as last reported end of FY1 still show a healthy gap down to the point of non-viability – the point which would trigger the CoCo’s (AT1s) – which usually is between 5.125% and 7% depending on the regulatory entity. 

The LDR (Loan-to deposit) liquidity measure is used to assess banks’ total loans to its total deposits. Intrinsically, a bank would want to have a well upholstered LDR in times of abnormal outflows of deposits to best absorb the stress. At a glance, none of the below show worryingly stretched ratios – but in particular Nordic banks (Jyske Bank in particular) run relatively high loan to deposit ratios, which could be something to worry about in times of deposit stress. *

Find out which banks to follow and why the European banking loan books are much more vulnerable to a credit crisis than US peers. The first 14 days are FREE.