China banks eclipse US rivals
By Patrick Jenkins in London
Published: January 10 2010 22:32 | Last updated: January 10 2010 22:32

Chinese banks have cemented their position as the most highly valued financial institutions, taking four of the top five slots in a ranking of banks’ share prices as a multiple of their book values.

China Merchants Bank, China Citic, ICBC and China Construction Bank lead the table, followed by Itaú Unibanco of Brazil, all with a price-to-book multiple of more than three.

Over the past six years, the average price-to-book value of the biggest 50 banks has halved from two to one.

This means that investors believe the average bank is worth no more than the value of its balance sheet. Most western banks are trading at well below their book value.

But investors are attaching a growing premium to emerging markets banks, led by China Merchants, the most highly rated of the biggest 50 banks by market capitalisation, on a multiple of 4.3, according to Bloomberg data.