Impact of Coronavirus on Credit Quality, Capital Adequacy, and Profitability Is Manageable

European banks have never been this cheap. Ever. Even at their 2008 nadir, investors believed European banks were worth more than they do today. The average multiple of European banks fell by half after the 2008 global financial crisis, which was justified as their profitability was also halved. There is no indication of such a step change in profitability happening now. It seems investors are fretting about the prospect of large-scale asset impairments, which may force banks to once again pass the cap around for a capital injection. We published an Observer, "Impact of Coronavirus on Credit Quality, Capital Adequacy, and Profitability Is Manageable; European Banks Remain Undervalued" on July 6 to explore the valuation, credit quality and capital adequacy of European banks in more detail.