Global financial crisis: Winners, losers
It’s no wonder bank executives are still under pressure more than six years after the financial crisis. Deutsche Bank AG, whose co-chief executive officers announced Sunday they’re stepping down, fares worse than its peers in share performance since the end of 2008, as well as in profitability and cost efficiency.
HSBC Holdings Plc, which said on Tuesday it would eliminate as many as 25,000 jobs and sell operations in Brazil and Turkey, ranks in the middle of the pack by most criteria. Its costs in relation to revenue have actually increased since 2008, leading CEO Stuart Gulliver to cut deeper.
Shares of Frankfurt-based Deutsche Bank are worth half as much as the bank’s book value, indicating the market assigns less value to the company than management believes it might get in liquidation.
The price-to-book value of London-based HSBC is also below 1.0. Deutsche Bank’s return on equity of two per cent is about a 10th of what it was before the crisis.
ROE shows how well management is investing shareholders’ money. HSBC’s ratio of cost to revenue is among the lowest because the company is predominantly a retail bank with thousands of branches and a small investment bank. Tellers and customer representatives are paid less than traders and investment bankers.
Still, HSBC’s cost-to-revenue ratio has risen since the crisis, putting pressure on the bottom line. Investors in Goldman Sachs Group Inc., Morgan Stanley, JPMorgan Chase & Co. and Barclays Plc have seen their investment more than double in the past seven years. Deutsche Bank and HSBC shareholders have gotten meager returns in comparison.
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