## Figure 1.22. Banking Sector Market Valuations and Return Performance

## Source details

**Canonical URL:** [Figure 1.22. Banking Sector Market Valuations and Return Performance](https://www.imf.org/-/media/files/publications/gfsr/2017/april/chapter-1/figure1-22.pdf)

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- [Markdown version](/-/media/files/publications/gfsr/2017/april/chapter-1/figure1-22.pdf.md)
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### European Bank Equity Prices and the Slope of the Yield Curve
- Equity price index (left scale) and yield curve slope (basis points, right scale) are shown together for the period that includes Jan. 2016 through Jan. 2017.
- Note: the yield curve slope shows the difference between the three-year euro swap rate and the overnight euro rate.
- Annotation shows rising bank equity prices alongside movements in the yield curve slope.

### Bank Price-to-Book Ratios (Multiple)
- Bank price-to-book ratios increased, but European equity valuations remain low relative to historical levels.
- Percentile markers displayed: Median, 25th percentile, 40th percentile, 60th percentile, 75th percentile.
- Panel basis: "Panel 3 is based on a sample of 172 of the largest European banks."

### European Banks, by Return on Equity Thresholds over Time (Percent of sample, by assets)
- Banks categorized by ROE thresholds: Weak (ROE < 8%), Challenged (8% ≤  ROE < 10%), Healthy (ROE ≥ 10%).
- Panel shows a significant proportion of banks with weak profits over time.
- Panel basis: "Panel 3 is based on a sample of 172 of the largest European banks."

### Selected European Bank Return on Equity (Percent)
- Analysts’ forecasts are included and indicate limited near-term improvement: "Analysts’ forecasts".
- Panel basis: "Panel 4 is based on about 80 European banks with analysts’ forecasts."
- Percentile series presented: 75th, 60th, 50th, 40th, 25th.
- Descriptor: "Below book value" and "ROE 8–10%" appear as reference annotations.

### Structural Causes behind Weak Profitability
- Structural and performance indicators listed:
  - Return on equity
  - Leverage
  - Return on assets
  - Revenue
  - Costs
  - Loan loss provisions
  - Over-banking
  - Bad debt overhang
- Structural metrics and measures referenced:
  - Assets to GDP
  - Concentration
  - Number of banks
  - Number of branches
  - Headcount
  - NPL ratio
  - NPL coverage
  - NPL disposals
- Unattributed numeric sequence shown in the panel: 15 36 17 12 32 16 14 14 53 49 69 74

Notes and metadata (as presented in figure)
- Sources: Bloomberg L.P.; SNL Financial; and IMF staff estimates.
- E = estimate; NPL = nonperforming loan; ROE = return on equity.
- Figure caption lines: "1. European Bank Equity Prices and the Slope of the Yield Curve", "2. Bank Price-to-Book Ratios", "3. European Banks, by Return on Equity Thresholds over Time", "4. Selected European Bank Return on Equity", "5. Structural Causes behind Weak Profitability".

*Source: IMF staff (figure content from figure1-22.pdf).*

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_Source: https://www.imf.org/-/media/files/publications/gfsr/2017/april/chapter-1/figure1-22.pdf_