This week, the largest banks in Europe will release their second-quarter profits. All eyes will be on them to see if the current political turmoil has affected confidence or if the advantages from higher interest rates have peaked.
Although a second rate cut by the European Central Bank is anticipated in September, bank profits have been remarkably strong thus far, and their stock has continued to rise.
Analysts at JP Morgan stated that European banks are not sensitive to interest rate changes, and they anticipate that net interest income (NII), which is the difference between the amount of money banks receive from loans and the amount they pay on deposits, would continue to be high.
Furthermore, they stated that the experience of U.S. banks reporting this month indicates "no tolerance for NII disappointment" given the high expectations and share prices that are close to nine-year heights.
The two biggest bankers in the euro zone in terms of market value, Santander in Spain and BNP Paribas in France, together with Deutsche Bank in Germany and UniCredit in Italy, will all be reporting for the April to June period on a busy Wednesday.
The Spanish bank Sabadell, which is the target of BBVA's aggressive acquisition approach, reported on Tuesday. As it tries to persuade shareholders that it is better off on its own, the outcomes will be constantly monitored.
Sam Adams will be my guest today as we review the forecast for renewable energy stocks.
The UK banks begin operations on Thursday with the British Lloyds Banking Group, followed by NatWest on Friday and Barclays and HSBC the following week.
Spain's Bankinter said last week that while interest rates were higher than anticipated, its loan revenue performed well in the second quarter. Its shares increased when company increased its 2024 NII projection.
"We think profitability will stay pretty strong," S&P's Elena Iparraguirre, who covers European banks, stated.
In order to provide a clearer picture of the prognosis for banks in 2025, Iparraguirre stated that she would be observing the "magnitude of the NII compression and how it evolves quarter after quarter".
In contrast to the 7% increase in the Euro STOXX 600, European bank shares have increased by 20% this year thanks to promised dividends and share buybacks totaling 120 billion euros ($130 billion).
However, due to worries about the durability of their earnings, the majority of lenders continue to trade below their tangible book value.
Based on two-year future price-to-earnings ratios, JP Morgan analysts observe that European banks trade at a 43% discount to their U.S. counterparts, compared to a historical average of 27%.
Following a spike in support for populist parties at European elections, President Emmanuel Macron called for early legislative elections, which caused French banks BNP Paribas and Societe Generale to plummet in June.
Given their worries about the possibility of a less market-friendly left-wing administration in Paris, investors will be eager to hear from lenders about the prospects.
Growing activity in investment banking, including increased underwriting and advising fees, could help European banks with sizable investment bank divisions.
Analysts predict that divisions at banks like Deutsche Bank and UBS, which reports on August 14, will have a great quarter after Wall Street banks' better-than-expected earnings.
Analysts predicted that while income from fixed income, currencies, and commodities (FICC) will continue to be modest, revenues from trading stocks should surpass those from the same quarter in 2023.
Deutsche Bank is expected to declare a deficit for the second quarter, defying 15 straight quarters of profitability due to an investor lawsuit about its Postbank business.
(Sourec:www.reuters.com)
Although a second rate cut by the European Central Bank is anticipated in September, bank profits have been remarkably strong thus far, and their stock has continued to rise.
Analysts at JP Morgan stated that European banks are not sensitive to interest rate changes, and they anticipate that net interest income (NII), which is the difference between the amount of money banks receive from loans and the amount they pay on deposits, would continue to be high.
Furthermore, they stated that the experience of U.S. banks reporting this month indicates "no tolerance for NII disappointment" given the high expectations and share prices that are close to nine-year heights.
The two biggest bankers in the euro zone in terms of market value, Santander in Spain and BNP Paribas in France, together with Deutsche Bank in Germany and UniCredit in Italy, will all be reporting for the April to June period on a busy Wednesday.
The Spanish bank Sabadell, which is the target of BBVA's aggressive acquisition approach, reported on Tuesday. As it tries to persuade shareholders that it is better off on its own, the outcomes will be constantly monitored.
Sam Adams will be my guest today as we review the forecast for renewable energy stocks.
The UK banks begin operations on Thursday with the British Lloyds Banking Group, followed by NatWest on Friday and Barclays and HSBC the following week.
Spain's Bankinter said last week that while interest rates were higher than anticipated, its loan revenue performed well in the second quarter. Its shares increased when company increased its 2024 NII projection.
"We think profitability will stay pretty strong," S&P's Elena Iparraguirre, who covers European banks, stated.
In order to provide a clearer picture of the prognosis for banks in 2025, Iparraguirre stated that she would be observing the "magnitude of the NII compression and how it evolves quarter after quarter".
In contrast to the 7% increase in the Euro STOXX 600, European bank shares have increased by 20% this year thanks to promised dividends and share buybacks totaling 120 billion euros ($130 billion).
However, due to worries about the durability of their earnings, the majority of lenders continue to trade below their tangible book value.
Based on two-year future price-to-earnings ratios, JP Morgan analysts observe that European banks trade at a 43% discount to their U.S. counterparts, compared to a historical average of 27%.
Following a spike in support for populist parties at European elections, President Emmanuel Macron called for early legislative elections, which caused French banks BNP Paribas and Societe Generale to plummet in June.
Given their worries about the possibility of a less market-friendly left-wing administration in Paris, investors will be eager to hear from lenders about the prospects.
Growing activity in investment banking, including increased underwriting and advising fees, could help European banks with sizable investment bank divisions.
Analysts predict that divisions at banks like Deutsche Bank and UBS, which reports on August 14, will have a great quarter after Wall Street banks' better-than-expected earnings.
Analysts predicted that while income from fixed income, currencies, and commodities (FICC) will continue to be modest, revenues from trading stocks should surpass those from the same quarter in 2023.
Deutsche Bank is expected to declare a deficit for the second quarter, defying 15 straight quarters of profitability due to an investor lawsuit about its Postbank business.
(Sourec:www.reuters.com)
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