Live Markets: Best year since 1997, are European banks still a buy?

Erste Bank AG

02/12/2025 11:19

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Eurozone inflation ticks up

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BEST YEAR SINCE 1997, ARE EUROPEAN BANKS STILL A BUY?

European banks .SX7P have been true standout gainers this year with a surge of near 60% - their best annual performance since 1997, and while the easy gains may look behind us, many investors and investment banks stay upbeat.

Among them is J.P.Morgan.

The Wall Street bank enters 2026 with a reconfirmed positive view on the sector, citing what it calls a "perfect environment" driven by solid macro and strong bottom-up fundamentals.

It sees GDP growth improving, rates and inflation stable, and low unemployment all supporting EPS gains of nearly 10% annually through 2027, helped by buybacks.

Valuations have already re-rated to 8.9 times earnings, but JPM analysts see more upside - 12% over the next year and potentially 25% in the longer term as cost of equity falls.

Top picks include Barclays BARC.L, NatWest NWG.L, Deutsche Bank DBKGn.DE and SocGen SOGN.PA, while Caixabank CABK.MC, StanChart STAN.L and Erste ERST.VI are new additions to the portfolio.

And relative to the U.S., JPM favours Europe, citing a still hefty valuation discount and strong capital buffers.

But beware of potential risks such as lower rates, weaker growth, and long-term competition from digital finance.

(Danilo Masoni)

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EARLIER ON LIVE MARKETS:

HOW INFLATION FORECASTS CAN EMBOLDEN THE ECB DOVES CLICK HERE

BANKS AND BAYER LEND SUPPORT CLICK HERE

BEFORE THE BELL: FUTURES STEADY, FOCUS ON BAYER, STOXX RESHUFFLE CLICK HERE

AUCTION BID STEADIES JAPAN BOND SLIDE CLICK HERE

Best year since 1997 for European banks https://tmsnrt.rs/4pE3ZRZ