The stock, which already had the lowest
price-to-book ratio of any big European bank, has plunged almost 10% this week and 15% from its Monday peak, it stated.
FAB has gained 33.26 per cent in the past year and has a
price-to-book ratio 1.91 times.
In terms of
price-to-book ratio, Dubai currently trades at 0.9x which is a strong support factor.
In terms of revenues however, the report pointed out that revenue growth for the global banking sector remains muted, with its
price-to-book ratio also consistently lower than that of every other major sector over the period from 2012 to 2017.
The combined entity is valued at a
price-to-book ratio of 1.4, according to calculations by Saudi Fransi Capital, which added that the deal significantly strengthens HSBC's presence in the Kingdom.
(BTMU, A/Stable/a), acquired a 19.9% stake in Danamon on 29 December 2017 from entities affiliated with Singapore's Temasek for USD1.2 billion, equivalent to a 3Q17
price-to-book ratio of 2x.
A company's willingness to pay regular cash dividends at an increasing rate sends a powerful clue about its future growth, which helps drive
price-to-book ratio to increase.
However, there has been an obvious post-revolution discount to all the recent acquisitions, with QNB/NSGB at a
price-to-book ratio (P/B) of 1.9x, ENBD/Paribas at 1.6x, and Al Ahli Bank of Kuwait/Piraeus at 1.4x and Attijariwafa/Barclays-Egypt estimated at 1.7-1.8x versus a P/B of 6.0x in SanPaolo/Bank of Alexandria (BOA) back in 2006 and a 4.0x book for the deal that was never completed of Banque du Caire in 2007.
* Value, measured as a security's
price-to-book ratio, with low-ratio stocks outperforming high-ratio stocks
Capital markets drive the return on capital toward the cost of capital, primarily through adjustments in the
price-to-book ratio. If capital returns exceed the cost of capital, the
price-to-book ratio will increase (prices will be bid up) to bring the return on capital back down to the cost of capital, and vice versa.
