Euro zone: The decline in bank share prices is understandable

It is striking how much euro-zone bank share prices have fallen relative to an economywide equity market index. Yet it is understandable: Euro-zone banks’ profitability and returns are low under the effect of low interest rates and weak loan production; Banks’ low return on equity makes it hard for them to increase their capital, forcing them to contract in size; The effect of digital technologies on banks’ activity and returns is still uncertain.