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European Banks' Value Could Drop 20% in 2008

The value of European banks could tumble by as much as 20% in 2008, Pierre Yves Gauthier, head of strategy at Oddo Securities, told "Squawk Box Europe" Tuesday, as the subprime-related turmoil takes its toll on the sector's growth potential.

Investors could discover by the end of the year that European banks' earnings have ceased to grow, according to Gauthier, and for 2008 "a collapse of about 20% (that) would slash the valuation of the bank by as least as much."

"We wanted to stress the fact that this crisis is a very serious one and is hinging on the banks," Gauthier added.

Following forecast-beating profit from Goldman Sachs last week, Gauthier pointed out that the stark prediction is limited to the European banking sector, due in part to sophisticated investment practices used by the giant U.S. financial houses.

The banking sector has been one of the hardest hit over the past month as tightening credit markets and extreme suspicion have hampered normal business practices.

Gauthier's bleak outlook for European banks is in line with his view of a slowing of the global economy.

"We are heading for a slowdown in terms of global growth," Gauthier said.

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