During the crisis in 2011, some European banks got punished very severely. Some banks lost as much as 80% of their market value in the last year.
ING Group (NYSE:ING), Societe Generale (OTCPK:SCGLF), Deutsche Bank (NYSE:DB), HSBC (HBC), BNP Paribas (OTCQX:BNPQY), Santander Group (OTCPK:BCDRF), Barclays (NYSE:BCS) and many other giant banks saw their share prices plunge by at least 50% in the last year. The plunge is very similar to what we experienced in US in 2008-2009; some of these companies started to recover, while others are still struggling.
Is it a good time to buy those banks for value investors? I would say it depends. The fact is, it depends on your short term and long term goals, as well as your risk appetite. If you are a year or two from your retirement, I'd say stay away from those companies. If you are in your 20s or 30s and don't mind holding stocks for 2-3 years, I would recommend you to give it a shot as long as your risk appetite is high.
Many of these banks have strong earnings, lots of assets and very low P/E values. If any of these banks get in serious trouble, some bailouts will follow. If one is diversified enough, they could handle the unlikely event of one of the banks going bankrupt well too. For example, if someone invested equal amounts of money to 5 of these cheap banks, and 2 years later 4 of the banks went up by 50% each and one of the banks went bankrupt, the person would still be profiting big-time.
Yes, the chances of one of these banks going bankrupt is decent; however, chances of most of these banks going up by more than 50% is even bigger. Just last month, ECB gave the banks unlimited free money to show them how committed it is to keep them solvent. This is a serious risk with a lot of upside potential. If you have the stomach to storm it, I would say now is the best time to get in.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.