LIVE MARKETS-European bank earnings keep re-rating on track

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EUROPEAN BANK EARNINGS KEEP RE-RATING ON TRACK

With the first-quarter reporting season at a close, Jefferies believes European bank earnings contained enough for the sector to continue to re-rate, with the aggregate pre-tax results coming in 10% above consensus.

Jefferies also notes that most guidance and outlook commentary was, at worst, maintained and that aggregate capital ratios remain sufficiently above requirements.

"These elements support our view that bank stocks are still cheap relative to earnings, distributions and to other geographies," Jefferies says.

"We see no reason why P/E multiples shouldn't continue to revert to at least the 20-year mean of 11.4x (from c.9.0x today)," they add.

Since the beginning of the year, the STOXX Europe 600 Banks index .SX7P is up 30%, compared to a 8.5% rise for the broader STOXX 600 .STOXX.

(Samuel Indyk)

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