HALISTER: Selloff in European Banking Stocks Is Overdone: Credit Suisse

Selloff in European Banking Stocks Is Overdone: Credit Suisse

(Bloomberg) -- European banking stocks are pricing in a 50% chance of a crisis/economic recession, which is “too high,” Credit Suisse equity strategists including Andrew Garthwaite and Marina Pronina write in note.
  • Banks have sold off on concerns over developed market growth, but now gap between their performance and PMI new orders is close to post-crisis high
  • Banks’ credit has lagged selloff in shares, suggesting market movement not about credit crisis worries
  • Banks’ performance correlated to oil price due to exposure to the energy sector: Credit Suisse thinks oil has troughed
  • Despite positive short-term stance, Credit Suisse strategists don’t see European banks sector as an attractive long-term investment
    • Banks offer an asymmetric return profile; their leverage is still high; significant regulatory, tax, litigation risk and pressure on fee income
  • Top picks are: Erste, Danske, Intesa Sanpaolo
NOTE:
  • Stoxx banking sector index down 21% YTD, worst sector performance
  • Feb. 15: Loans to Energy Sector Not a Threat to European Banks, BNP Says
  • Feb. 15: European Banks’ Capital Positions Not Under Threat: BofAML
Alert: HALISTER
Source: BFW (Bloomberg First Word)

Tickers
DANSKE DC (Danske Bank A/S)
EBS AV (Erste Group Bank AG)
ISP IM (Intesa Sanpaolo SpA)

People
Andrew Garthwaite (Credit Suisse Group AG)
Marina Pronina (Credit Suisse Group AG)

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