Some European banks are attractive investments because shares are cheap amid the region’s debt crisis and may benefit from a rebound in economic growth and investment banking revenue, analysts at Deutsche Bank AG, Sanford C. Bernstein and JPMorgan Chase & Co. said.
European financial stocks were raised to “overweight” by Deutsche Bank, saying the industry is undervalued. Financial firms will benefit from an expanding global economy and Spain won’t “become a victim of the crisis,” the analysts, including Joelle Anamootoo, wrote in a report dated Dec. 3.
Banks have been the second-worst performers among 19 industry groups in the Stoxx Europe 600 Index this year. The sector index has dropped 10 percent as Greece and Ireland sought bailouts and concern grew that more European countries, such as Spain and Portugal, may struggle to shore up their public finances, hampering economic growth.
The impact of the sovereign-debt crisis on banks’ trading appears to be “much less widespread and devastating” than in May 2010, Bernstein’s Dirk Hoffmann-Becking said in a note today. Capital markets should continue to “thaw up,” which should be “good news” for investment banks, particularly UBS AG and Credit Suisse Group AG, and they are likely to outperform commercial banks, he said.
Investment-banking revenue may pick up from the third quarter after a “satisfactory start” in the fourth quarter, JPMorgan analysts, led by Kian Abouhossein, wrote in a separate report. The brokerage’s top picks are Zurich-based UBS, BNP Paribas SA of France and the U.K.’s HSBC Holdings Plc, while it’s avoiding banks in countries like Ireland, Greece, Portugal and Spanish lenders with a domestic focus, he said.
Analysts at BofA Merrill Lynch Global Research today added BNP, Danske Bank A/S and Lloyds Banking Group Plc to their “most preferred list,” while putting Deutsche Bank on its “least preferred list.”
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