At the start of 2009, you wouldn't have touched a bank with a bargepole – in the UK or anywhere else. They were by far the worst performers on the European stock markets. From its peak in 2007, the sector lost more than a fifth of its value.
How times change. The spectacular recovery in bank shares during 2009 wasn't confined to the UK. The DJStoxx Europe 600 banking sub-index is up over 50 per cent. That's partly down to a 'relief rally'. But banks have chipped in with a fair bit of self-help.
The annual results season raised hopes that recovery was well under way. Credit Suisse swung back into profit. Deutsche Bank fared well enough to raise its dividend and maintain generous bonus packages. Even Banco Santander posted profits well ahead of expectations, as earnings in Brazil offset domestic torpor in Spain. But the atmosphere is far more sanguine as the first-quarter reporting season approaches, and in the wake of news that Goldman Sachs has been accused of mis-selling high-risk products.
The idea that European banks are far better placed than those of the UK – where two banks remain heavily dependent on state support – is only partly true. The process of cleaning up Europe's banking industry is far from complete, and banks face specific challenges within each of the major European countries.
