LIVE MARKETS-Why stay bullish on Europe's banks after a 60% rally?

ReutersSep 22, 2025 11:35 AM

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WHY STAY BULLISH ON EUROPE'S BANKS AFTER A 60% RALLY?

European banks have already had a stellar run in 2025, with euro zone lenders .SX7E up 60% year-to-date. So why stay bullish?

Mediobanca Securities argues that even though this sector is no longer cheap, it still offers good relative value.

According to the Italian investment bank, most of the rally came from expansion of multiples rather than earnings upgrades. Banks now trade near their historical PE of 9 times, but remain cheaper than other EU sectors and global peers.

Mediobanca believes this sector offers strong and steady shareholder value, with RoTE expected to hold around 14% through 2027 — making further re-rating plausible.

And the macro backdrop also looks stable, with limited recession risks and potential German fiscal support to counter the hit from tariffs.

Yet it advises against a broad "buy everything" strategy, which may no longer work as before.

"Higher prices demand a switch from an 'all-in' long approach to a disciplined positioning, keeping our preference for capital return with excess capital buffers and lower PE".

Its top picks include Santander SAN.MC, UniCredit CRDI.MI, BNP BNPP.PA, Lloyds LLOY.L and ING INGA.AS.

(Danilo Masoni)

EARLIER ON LIVE MARKETS:

BRITISH RETAIL SECTOR: BUDGET WORRIES AND RESILIENT SPENDING CLICK HERE

JPM FLAGS UPSIDE POTENTIAL FOR EURO ZONE BUYBACKS CLICK HERE

AUTOS SECTOR DRAGS EUROPEAN STOCKS LOWER CLICK HERE

EUROPE BEFORE THE BELL: FUTURES SOFT, AUTOS IN FOCUS CLICK HERE

FEDSPEAK TO CUT THROUGH THE NOISE CLICK HERE

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