The declines in large European banks in the past year are simply breathtaking …
Societe Generale SA (SCGLY) of France, one-year returns down 29.7% in the past year.
Banco Bilbao Vizcaya Argentaria SA (BBVA) of Spain, down 39%.
Standard Chartered PLC (SCBFF) of the U.K., down 50.4%.
Royal Bank of Scotland Group (RBS) of the U.K., down 62.9%.
Just look at the table below, a version of which I just published in my most recent Safe Money Report.
I could also bring up Deutsche Bank (DB) of Germany, down 57% to an all-time low for its U.S.-traded ADRs. Or Credit Suisse (CS) of Switzerland, down 60.4% to an all-time low for the U.S. shares. Then you have banks that are mostly traded in Europe, like the extremely troubled Banca Monte dei Paschi di Siena (BMDPY) in Italy — down 81.7%. Or another Italian bank UniCredit SpA (UNCFF), down 67.9%.
These aren’t small, micro-cap financial institutions. This isn’t like if some community bank with a handful of branches in Oklahoma or Texas was to go belly up because of souring energy loans. These are massive, multibillion-dollar institutions with operations and financial links all over Europe and the world — and they’re dropping like flies for a variety of reasons.
Take Italy. A whopping 17% of the country’s bank loans are estimated to be impaired. That compares with only 5% here in the U.S. at the absolute depths of the financial crisis in 2008-09.
In Germany, Deutsche Bank was recently labeled one of the most potentially dangerous banks in the world by the International Monetary Fund. It lost around $7.5 billion last year alone, and had notional derivatives exposure of around $46.6 trillion euros at the end of 2015 (though net credit exposure is theoretically much more limited).
In the U.K., the biggest worry is Brexit and the ongoing fallout from the vote. One sign of major turmoil: Several high-flying British real estate funds just slammed the door shut in investors’ faces this week, freezing redemption requests. They did so because liquidation requests were flooding in, and they didn’t want to be forced to fire-sale properties in order to cover those demands for money.
If it all sounds familiar to you, it’s because we saw these same kinds of problems here in the U.S. during our major credit crisis. I don’t KNOW if any of these struggling Euro-banks face their own "Lehman Moments." But I can’t rule out a Lehman Brothers-style collapse, either … and neither can many other investors, judging from the action in the interest rate, currency, and credit markets.
My advice? Continue to stay away from these turkeys. Avoid U.S. financial stocks that are vulnerable to spillover selling. And by all means, take advantage of the profit opportunities that Euro-bank chaos is creating in the markets.
That’s exactly what I’m doing in my All Weather Trader, by the way. I just told my subscribers to grab three rounds of solid double-digit profits — in as little as six days — and I’m confident many more similar opportunities lie ahead.
(Editor’s note: To get more information, click here or call Mike’s team at 1-800-393-0189.)
Until next time,