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Mint
01-07-2025
- Business
- Mint
European Banks' First-Half Stock Gains Are Biggest This Century
European bank stocks just completed their strongest first-half since 1997, and in doing so extended what has been a golden run for the sector. The Stoxx 600 Banks Index rose 29% in the six months through June 30, the top-performing subgroup in Europe, as investors piled into lenders for their strong returns and resilient earnings. An increase in deal-making added more fuel to the fire, particularly in Italy. Among the main highlights of a stellar first half, Banco Santander SA's advance pushed it past UBS Group AG to become continental Europe's most valuable lender, while Commerzbank AG's value appreciated so much that UniCredit SpA doesn't see it as an attractive deal target. Looking ahead, some analysts are bullish about the sector's ability to ride the crest of a wave despite macroneconomic uncertainty and trade-related risks. KBW's Andrew Stimpson says the prospect of continued outperformance is founded on a much improved earnings profile and valuation multiples that remain below long-term norms. Here are five charts that illustrate a historic first half for European banks: Societe Generale Leads Gains Societe Generale SA has surged 79% since the start of the year and is trading near its 2017-high as Chief Executive Officer Slawomir Krupa's turnaround plan for the French bank gains traction. Since taking office two years ago, he has focused on exiting non-core businesses, boosting the balance sheet, lifting profitability targets and shareholder payouts. Banco Santander analysts have SocGen as their preferred French bank, citing its potential to surprise on the upside, helped by cost-cutting efforts, they said in June. Commerzbank Surpasses €30 Billion Also among top-performing bank stocks this year is German lender Commerzbank, whose market capitalization surpassed €30 billion for the first time in May. Its multi-year rally has been fueled by earnings strength and takeover interest. Its share price has more than doubled since UniCredit took a stake in September and raised the possibility of a full-blown merger. Still, that move was effectively ruled out by the Italian lender's Chief Executive Officer Andrea Orcel in June, saying such a move would not add value given the stock's rally. Spanish Banks Keep Shining Spanish lenders, which had rallied on the back of higher interest rates, have sustained gains through the European Central Bank's cutting cycle on robust earnings, fee-generating businesses and M&A deals. Banco Santander, which has jumped 57% since the start of the year, has surpassed UBS as the biggest bank in continental Europe by market value. Elsewhere, BBVA SA plans to stick with its bid for smaller peer Banco Sabadell SA, after the Spanish government delayed a potential merger. Deutsche Bank's German Boost Deutsche Bank AG shares have climbed 51% so far this year and are trading around 2015 levels, as the German lender has boosted payouts to shareholders and is set to benefit from the impact of massive government fiscal stimulus in its home country. The firm has made increasing payouts a key element of its strategy as Chief Executive Officer Christian Sewing seeks to lift the share price. Still, concerns over a recent capital ratio disclosure pressured the stock on Monday. Italian Banks Are All About M&A Italian lenders are currently in a deal wave that is set to reshape the country's finance industry. After cleaning up their balance sheets, some firms are turning their sights on takeovers again as surging profits from higher interest rates lifted share prices. UniCredit is among Europe's best performers this year, up 48% as it pursues Italian peer Banco BPM SpA while doubling its stake in a Greek lender. Its market capitalization exceeded that of rival Intesa Sanpaolo SpA in May to make it Italy's largest bank by that metric. Peers Mediobanca SpA and Banca Generali SpA have recently hit fresh record highs. With assistance from Julien Ponthus. This article was generated from an automated news agency feed without modifications to text.
Yahoo
28-03-2025
- Business
- Yahoo
European Banks Have Best Quarterly Streak Since Financial Crisis
(Bloomberg) -- The rally in European banking stocks shows few signs of cooling down after another stellar quarter. Why Did the Government Declare War on My Adorable Tiny Truck? How SUVs Are Making Traffic Worse Gold-Rush Fever Returns to Historic New Zealand Mining Town Trump Slashed International Aid. Geneva Is Feeling the Impact. These US Bridges Face High Risk of Catastrophic Ship Strikes The Stoxx 600 Banks Index has surged 25% this year, its best three months since 2020. That's made it the top-performing sector in Europe by far as investors keep increasing their exposure, and strategists see more gains ahead. Their appetite is being driven by series of factors: firstly strong earnings seasons, hefty share buybacks and M&A potential, and now massive public spending plans that will probably keep European interest rates high. Over a 10-quarter winning streak — the longest since before the financial crisis — banks have returned over 160% including dividends, triple the 52% for the broader Stoxx Europe 600. 'The operating environment is very different today to almost any time over the past 20 years – we have banks talking about loan growth again, an upward sloping yield curve and governments at least talking about reducing the regulatory burden,' said Keefe, Bruyette & Woods's head of European bank research Andrew Stimpson. 'That likely means there is still more good news.' Following this run, some bears had expected lenders' outperformance to start fading, particularly as central banks are now cutting rates. Instead earnings have proved their business remains resilient, while buyback programs are also driving up shares. The likes of Societe Generale SA, Commerzbank AG and Banco Santander SA — repurchasing their own shares — have climbed more than 40% this year. The latest tailwind has been Germany passing a landmark spending package, creating a potentially unlimited supply of money to rearm to deter Russia. It will also set up a €500 billion ($540 billion) fund to invest in the country's aging infrastructure. The country's banks are set to benefit, with Deutsche Bank AG jumping 35% this year to trade near 10-year highs. 'The shift in fiscal policy will likely drive a stronger outlook for loan growth given the increased government expenditure on defense, infrastructure, and state/local projects,' JPMorgan Chase & Co. analysts led by Kian Abouhossein wrote in a note. They expect a long term re-rating for lenders in the region. The geopolitical landscape, along with cooling inflation, are reducing the chances of the European Central Bank cutting rates below 1.5%, implying less pressure on lending revenue, the JPMorgan analysts said. While the ECB this month lowered rates for the sixth time since June, it indicated its cutting phase may be drawing to a close. The combination of lower rates and longer-term government borrowing plans has steepened the German bond yield curve the most since 2021. That means banks are able to borrow money at a lower cost and lend at higher rates. Investors keep upping their exposure. According to Bank of America Corp.'s European fund manager survey this month, positioning in financials has increased, with banks now the largest sector overweight in Europe. And half of European investors think lenders still look attractive, up from 41% a month earlier, it found. The last earnings season proved profitability remains robust. The sector delivered 'another quarter of positive surprises,' Jefferies analysts said, noting the solid performance of net interest income. The European Union's largest banks posted another record year for profit, while 20 banks in the region announced over €18 billion in share buybacks during the first two months of the year alone. Mergers and acquisitions also remain a hot topic. Spain's BBVA SA is waiting for approval for its hostile bid for smaller lender Banco Sabadell SA, while Italy's UniCredit SpA has a move on both Commerzbank and Banco BPM. Easy Money Some analysts are questioning how long the positive fundamentals can last. After the series of stellar earnings seasons, profit growth is expected to plateau. The consensus for the sector sees very little return on average over the next 12 months, so the potential upside lies more with sentiment and valuation expansion. For Roberto Scholtes, head of strategy at wealth manager Singular Bank, the banking rally has been sound and based on genuine improvement in profitability, but the 'easy money' has already been made. 'Valuations are no longer that cheap, expectations aren't depressed, investor positioning is already quite long, and net interest margins are at an inflection point,' he said. Positioning is now a more crowded bet. Lenders were deeply overbought for much of January and February, and valuations are closing in on their long-term average. The sector now trades at about nine times forward earnings, yet it remains the second cheapest in Europe after autos. Banks are also on par with their forward book value, only half the level seen before the global financial crisis, implying there is still room to run. Deutsche Bank strategists including Maximilian Uleer and Carolin Raab are 'optimistic on banks given structurally higher bund yields, an economic recovery and a steeper yield curve.' Business Schools Are Back Google Is Searching for an Answer to ChatGPT Israel Aims to Be the World's Arms Dealer A New 'China Shock' Is Destroying Jobs Around the World The Richest Americans Kept the Economy Booming. What Happens When They Stop Spending? ©2025 Bloomberg L.P.
