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Most global bank stocks are in the negative territory so far this year. Especially European financials have been hit hard in recent months due to the resurgence of sovereign credit crisis. However some foreign bank stocks may be getting cheaper now and are worth a look at current levels.

From a Bloomberg article titled Europe Banks Valued at Post-Lehman Lows Show Sovereign Risks Intensifying published yesterday:

Investors are valuing European banks at levels not seen since the depths of the credit crunch that followed the collapse of Lehman Brothers Holdings Inc. as concern over a Greek default and debt contagion escalates.

A Bloomberg index shows 46 lenders trading at 0.56 times book value, the cheapest since the post-Lehman lows of March 2009, signaling investors estimate their net assets are worth less than the companies claim and are demanding discounts for perceived risks. Valuations reflect the impact of a potential sovereign default for some banks, according to Barclays Capital analysts led by Jeremy Sigee.

Based on the market’s reactions, it appears that investors are assuming the worst case scenario for European banks. This is especially true with lenders with heavy exposure to the PIIGS countries. The article added:

The Bloomberg Europe Banks and Financial Services Index of stocks dropped 4.1 percent today to the lowest level in almost 2 1/2 years. The index has slumped 37 percent so far this year, led by financial companies based in peripheral Europe, such as Banco Comercial Portugues SA and National Bank of Greece SA, as well as those with investments there, such as Commerzbank AG of Germany and France’s Societe Generale (GLE) SA.

The table below lists the YTD returns all the exchange-traded foreign bank ADRs:

S.No. Bank Name Ticker Share Price as of Sept 12, 2011 YTD % Change Country
1 Bancolombia CIB $62.66 1.21% Colombia
2 HDFC Bank HDB $30.80 -7.84% India
3 Banco de Chile BCH $79.53 -8.31% Chile
4 Banco Santander Chile SAN $82.40 -11.84% Chile
5 Westpac Banking WBK $100.86 -11.88% Australia
6 Banco Bradesco BBD $16.63 -18.04% Brazil
7 Shinhan Financial SHG $73.21 -21.97% Korea
8 HSBC HBC $39.42 -22.77% United Kingdom
9 Corpbanca BCA $21.39 -23.00% Chile
10 Mitsubishi UFJ Financial MTU $4.13 -23.66% Japan
11 Mizuho Financial MFG $2.86 -23.73% Japan
12 Banco Bilbao Vizcaya Argentaria BBVA $7.56 -25.66% Spain
13 ICICI Bank IBN $36.89 -27.15% India
14 UBS UBS $11.92 -27.63% Switzerland
15 Banco Santander S.A STD $7.50 -29.58% Spain
16 Itau Unibanco ITUB $16.52 -31.20% Brazil
17 KB Financial KB $36.16 -31.63% Korea
18 Grupo Financiero Galicia GGAL $10.11 -33.96% Argentina
19 Woori Finance WF $26.90 -35.26% Korea
20 Banco Santander Brasil BSBR $8.69 -36.10% Brazil
21 Deutsche Bank DB $29.92 -42.52% Germany
22 BBVA Banco Frances BFR $6.63 -42.84% Argentina
23 Credit Suisse CS $22.95 -43.21% Switzerland
24 Barclays Bank BCS $9.18 -44.43% United Kingdom
25 Royal Bank of Scotland RBS $6.76 -45.13% United Kingdom
26 Lloyds Banking Group LYG $1.94 -52.80% United Kingdom
27 National Bank of Greece NBG $0.77 -54.17% Greece
28 Banco Macro BMA $21.72 -56.73% Argentina
29 Bank of Ireland IRE $1.08 -59.25% Ireland

Source: BNY Mellon

Except Bancolombia (NYSE:CIB) all the banks noted above are in the red YTD with a few down over 50%. While European financials are hurt by the credit crisis, emerging market financials are off for other reasons such as rising interest rates, inflation, lack of loan growth, etc.

In order to evaluate the performance of foreign bank stocks from another perspective, I calculated their returns from the highs reached after the March, 2009 lows as shown in the table below:

S.No. Bank Name Ticker Share Price as of Sept 12, 2011 High reached after March,2009 lows % Change from High after March, 2009 Country
1 Bancolombia CIB $62.66 $69.44 -9.76% Colombia
2 HDFC Bank HDB $30.80 $38.28 -19.54% India
3 Banco de Chile BCH $79.53 $93.18 -14.65% Chile
4 Banco Santander Chile SAN $82.40 $99.99 -17.59% Chile
5 Westpac Banking WBK $100.86 $133.55 -24.48% Australia
6 Banco Bradesco BBD $16.63 $22.54 -26.22% Brazil
7 Shinhan Financial SHG $73.21 $101.34 -27.76% Korea
8 HSBC HBC $39.42 $64.42 -38.81% United Kingdom
9 Corpbanca BCA $21.39 $25.90 -17.41% Chile
10 Mitsubishi UFJ Financial MTU $4.13 $6.84 -39.62% Japan
11 Mizuho Financial MFG $2.86 $5.70 -49.82% Japan
12 Banco Bilbao Vizcaya Argentaria BBVA $7.56 $19.78 -61.78% Spain
13 ICICI Bank IBN $36.89 $58.22 -36.64% India
14 UBS UBS $11.92 $20.08 -40.64% Switzerland
15 Banco Santander S.A STD $7.50 $17.89 -58.08% Spain
16 Itau Unibanco ITUB $16.52 $26.30 -37.19% Brazil
17 KB Financial KB $36.16 $55.46 -34.80% Korea
18 Grupo Financiero Galicia GGAL $10.11 $17.10 -40.88% Argentina
19 Woori Finance WF $26.90 $50.33 -46.55% Korea
20 Banco Santander Brasil BSBR $8.69 $15.66 -44.51% Brazil
21 Deutsche Bank DB $29.92 $84.93 -64.77% Germany
22 BBVA Banco Frances BFR $6.63 $13.85 -52.13% Argentina
23 Credit Suisse CS $22.95 $60.08 -61.80% Switzerland
24 Barclays Bank BCS $9.18 $25.68 -64.25% United Kingdom
25 Royal Bank of Scotland RBS $6.76 $18.50 -63.46% United Kingdom
26 Lloyds Banking Group LYG $1.94 $7.51 -74.17% United Kingdom
27 National Bank of Greece NBG $0.77 $8.37 -90.80% Greece
28 Banco Macro BMA $21.72 $56.99 -61.89% Argentina
29 Bank of Ireland IRE $1.08 $20.18 -94.65% Ireland

Source: Yahoo Finance

While it seemed that most banks recovered strongly from the abyss of the Global Financial Crisis, the returns above show that the erosion in share prices since then have been terrible.

Note: Data shown above is known to be accurate from the sources used. Please do your own research before making any investment decisions.

Disclosure: Long BCH, BBD, ITUB, STD, BBVA, RBS, LYG, BMA

Source: Foreign Bank Stocks: Worth Another Look?