$12 trillion in off-balance sheet derivatives may be behind the sector’s underperformance this year
„The massive underperformance of European banks during 2018 is one of the stranger market phenomenon of the year. The SX7E index trading at just 8.6 times estimated earnings, and at 63% of book. China Construction Bank, by contrast, is trading at 57% of book.
Evidently, the market has about as much confidence in the book value of European banks as it does in the case of Chinese banks, which is quite a statement. What mines lurk below the surface in European banks?“ (…)