Looks like some banks are stretching and thinking about going for a run. :eek: Average price to book ratios are ranging around 0.6 for European banks as compared to 1.3 for Asian banks.
Flight of Euros Accelerates, Adding to Greece’s Worries, By LIZ ALDERMAN and RACHEL DONADIO Published: May 16, 2012, NYT
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Money has been fleeing Greece ever since the country’s debt crisis began more than two and a half years ago. But the outflow has picked up velocity since last week’s election, when the elevation of anti-austerity leftist parties in Parliament raised the specter in international financial markets of a Greek default. At a time when Greek’s banking system needs all the help it can get from the rest of Europe, its own depositors are making the banks weaker by the day.
An average of 4 billion euros, or $5.1 billion, has flowed out of Greece every month since 2009, when the European debt crisis first broke open.
President Karolos Papoulias seemed to stoke fears further on Tuesday when he revealed that 700 million euros had been taken out of Greek banks since the election. While several senior Greek banking executives said Wednesday that the money flow should not be characterized as a full-blown run on Greek banks, analysts said that the steady drawdown on deposits by consumers and companies could be expected to continue at least until new elections are held June 17, and possibly beyond.
Bankia pierde 2.400 millones en Bolsa desde la marcha de Rato, María Vega | Agencias | Madrid, Actualizado jueves 17/05/2012 13:03 horas, El Mundo
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Los clientes han retirado en una semana más de 1.000 millones de euros
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Por su parte, el secretario de Estado de Economía, Fernando Jiménez Latorre, ha negado que haya una salida de depósitos en Bankia y ha asegurado que el nuevo proyecto reúne todos los requisitos para ser un éxito de futuro.
En conferencia de prensa, Jiménez Latorre ha afirmado que hoy es una buena ocasión para transmitir a los depositantes de Bankia un mensaje de tranquilidad y ha reiterado que es un proyecto con un tamaño y un potencial extraordinario.
Only the ECB can make it a bank run: James Saft, By James Saft
Thu May 17, 2012 12:45pm IST, REUTERS
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Greeks have been withdrawing hundreds of millions of euros of deposits from their banks in recent days, driven by a rational but dangerously self-reinforcing fear that a Greek exit from the euro will leave them holding far less valuable new drachma.
That fear, though, is predicated on a shaky notion: that the players in the drama will do what they have said they would.
Greek depositors are worried that their politicians will repudiate the terms of the bailout and that the ECB and European authorities will, ultimately, cut them off, either directly or by refusing to accept dubious collateral in exchange for fresh euros.
That would bring down the Greek banking system, or most of it, and force Greek authorities to impose capital controls. Cue Spanish, Italian and Portuguese depositors, who might follow suit and start to withdraw their own deposits, putting massive amounts of collateral into the hands of the ECB and their own central banks.
The betting on this one comes down to whether you think European officials will stick with their principles or act in their own best interests, always a legitimate and uncertain question. The ECB could, at any point it chooses, pull the plug on the Greek banking system by refusing to accept the sort of bad collateral now being offered. A prudent act, utterly within their rights and a highly destructive one.
P/B ratio, From Wikipedia, the free encyclopedia
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The price-to-book ratio, or P/B ratio, is a financial ratio used to compare a company's book value to its current market price. The calculation can be performed in two ways, but the result should be the same each way. In the first way, the company's market capitalization can be divided by the company's total book value from its balance sheet. The second way, using per-share values, is to divide the company's current share price by the book value per share (i.e. its book value divided by the number of outstanding shares).
As with most ratios, it varies a fair amount by industry. Industries that require more infrastructure capital (for each dollar of profit) will usually trade at P/B ratios much lower than, for example, consulting firms. P/B ratios are commonly used to compare banks, because most assets and liabilities of banks are constantly valued at market values. A higher P/B ratio implies that investors expect management to create more value from a given set of assets, all else equal (and/or that the market value of the firm's assets is significantly higher than their accounting value). P/B ratios do not, however, directly provide any information on the ability of the firm to generate profits or cash for shareholders.
This ratio also gives some idea of whether an investor is paying too much for what would be left if the company went bankrupt immediately. For companies in distress, the book value is usually calculated without the intangible assets that would have no resale value. In such cases, P/B should also be calculated on a "diluted" basis, because stock options may well vest on sale of the company or change of control or firing of management.