UniCredit Bombshell Shouldn’t Be the Last One

[marmar]

(Bloomberg) Everyone in the world who pays any attention to the financial markets seems to know that the balance sheets of European banks are a joke. All you have to do is compare the stock prices of these companies with the book values on their balance sheets to see that.

On average the shares of the 32 companies in the Euro Stoxx Banks Index trade for about 44 percent of book value, or common shareholder equity, according to data compiled by Bloomberg. Put another way, a typical large euro-area bank would have us believe its net assets are worth more than twice what the stock market says the bank is worth. The problem is the companies’ numbers can’t be trusted, and it’s been this way for years.

So imagine the surprise this week when UniCredit SpA (UCG), one of Italy’s largest lenders, had the fortitude to acknowledge that its asset values were in need of an 11-figure chopping. The truly unexpected part wasn’t that the bank experienced a loss of 10.6 billion euros ($14.3 billion) during the third quarter, but that its management chose to recognize these losses’ existence.

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UniCredit can’t possibly be the only lender in Europe that has incurred such huge losses. And the markets are telling us its losses are probably even bigger than what the company has disclosed. Maybe next year will be when the banking industry’s real bombshells drop. ...............(more)

The complete piece is at: http://www.bloomberg.com/news/2011-11-17/unicredit-bombshell-shouldn-t-be-the-last-one-jonathan-weil.html