Oakmark’s Herro Says Plunge in European Banks Isn’t Justifiedby
Herro says a ‘value gap’ has opened up for many bank shares
Manager’s Oakmark fund trails 99% of peers this year
David Herro, chief investment officer of Harris Associates, said the decline in European bank stocks following the Brexit vote wasn’t justified by fundamentals.
“We have seen a massive destruction of the price of many European financials,” he said Wednesday in an interview on Bloomberg Radio. “I don’t believe the price destruction was anywhere near the decline in value. A big value gap has opened up.”
Herro manages the $22.5 billion Oakmark International Fund, which holds a number of European banks, including Credit Suisse Group AG and BNP Paribas SA Shares of both banks have tumbled since U.K. voters on June 23 decided to leave the European Union. Credit Suisse has fallen 22 percent since then.
Herro said nervous investors are ignoring the fact that the major European banks have built up their capital positions since the financial crisis of 2008 and are much more able to withstand economic shocks. “The margins of safety are much better,” he said.
Oakmark International Fund lost 13 percent this year, trailing 99 percent of rivals, according to data compiled by Bloomberg. Over five years the fund topped 53 percent of peers.