'Priced for earnings cyclicality we don't see,' UBS says on European banks in 2025

National Bank of Greece

10/12/2024 14:00

** "Banks are priced for earnings cyclicality we just don't
expect to see," UBS says, as "rational concerns" around
potentially lower ECB policy rates drive "exaggerated concerns"
around profits
    ** On these concerns, the sector trades at 6.9x 2025
consensus EPS, a 24% discount to the 9.1x long term average -
"too large a value gap", UBS says
    ** "Our ECB rate house view is for a 2% trough" - UBS
    ** The broker says banks are "very attractively priced in
absolute and relative terms" and predicts the sector to offer a
30% higher return on the 12-18 month outlook compared to other
European equities
    ** UBS welcomes the positive reception of M&A news in the
share prices and notes that "the urgency around inorganic
dealmaking has definitely stepped up several gears"
    ** Banks geared towards non-net interest income and marked
by high yield are the broker's top picks, including Barclays
 BARC.L , Bawag  BAWG.VI , ING  INGA.AS , Intesa SanPaolo
 ISP.MI , NBG Group  NBGr.AT , and Societe Generale  SOGN.PA  

 (Reporting by Jakob Van Calster)
 ((Jakob.vancalster@thomsonreuters.com))