Japanese Banks’ Strength Soars, Share Price Lags Post Lehman

While Japan continues to recover from two decades of deflation and weak growth, its banks have yet to see their share prices match their strong earnings. Part of this is because the earnings are low quality, but Citi analysts Hironari Nozaki and Kana Saito argue that the banks are being systematically undervalued.

“Although Japanese banks continue to post strong earnings, share price performance has not necessarily matched this,” they write. Even though some of those earnings come from the sale of securities and reversing loan-loss provisions, but that can’t be the whole story. “When the earnings of...