Winners and Losers among Global Banks

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Sunlight reflects off the twin-tower skyscraper headquarters of Deutsche Bank in Frankfurt, Germany, on June 6, 2015.

Photographer: Martin Leissl/Bloomberg

The financial crisis occurred more than six years ago. Yet, the bank officials have still not recovered from it.  Some bank’s (for example, Deutsche Bank AG) executive officers have stepped down citing their bank’s share performance, cost efficiency and profitability fared worse than their peers since 2008.  

 HSBC Holdings Plc, reduced as many as 25,000 jobs and decided to sell operations in Brazil and Turkey, ranks in the middle of the pack by most criteria. Revenue was less than cost and the cost gradually increased since 2008,  leading CEO Stuart Gulliver to take stringent measures.

 Shares of Frankfurt-based Deutsche Bank plunged to half its book value.  It means the management’s assessment is twice the value assigned by the market. The price-to-book value of London-based HSBC is also below 1.0.

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Deutsche Bank’s return on equity of 2 percent is about a 10th of what it was before the crisis. ROE shows how well management is investing shareholders’ money.

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As HSBC is  a retail bank with thousands of branches its ratio of cost to revenue is among the lowest.  It is a small investment bank and so payment to tellers and customer representatives are less than traders and investment bankers. Still, HSBC’s cost-to-revenue ratio has risen since the crisis, putting pressure on the bottom line.

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In the past seven years investors in Goldman Sachs Group Inc., Morgan Stanley, JPMorgan Chase & Co. and Barclays Plc are happy as their investments have more than doubled. The returns of Deutsche Bank and HSBC shareholders have dwindled in comparison.

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