LIVE MARKETS-UBS sticks with banks: "The new consumer staples"

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UBS STICKS WITH BANKS: "THE NEW CONSUMER STAPLES"

UBS strategist Andrew Garthwaite is sticking with banks, and sees plenty of reasons to do so.

"We have long been overweight banks and continue to be so strategically," he says, citing macroeconomic trends, attractive valuations, and other supporting factors.

First, banks offer a hedge against populism and fiscal slippage, a backdrop that supports rising bond yields - a key tailwind for the rate-sensitive sector. He also notes that strong currencies in Europe, the UK, and Japan, plus a weaker dollar, favor both developed and emerging market lenders.

Loan growth is also turning up, especially in France and Italy, while valuations remain depressed. European and U.S. banks trade at a PE discount of around 10% to historical norms, pricing in a significant slowdown UBS views as unlikely.

Furthermore, Garthwaite believes banks are now far more immune to recession than in the past. Combined with easing capital rules, less fintech disruption, and accelerating M&A, he makes the case that banks are "the new consumer staples."

(Danilo Masoni)

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