European banks21 Dec 2019 12:19
I came across this just now... from a US financial newsletter... and thought it might be of interest to some here.
"So that leads me into the next topic... Are European banks a value play?
As Philip Grant from famed investment newsletter Grant's Interest Rate Observer reported recently...
The Euro Stoxx Banks Index generated a 6.3% return on equity in the third quarter and trades at 0.62 times book value with a 5.8% dividend yield (that compares to an 11.8% third quarter [return on equity], 1.35 times price to book and 2.6% dividend yield for the U.S. KBW Index).
But look at all the European bank ETFs – like the iShares MSCI Europe Financials Fund (EUFN) and the German-traded iShares EURO STOXX Banks 30-15 UCITS Fund (EXX1.DE)...
Those two ETFs are up 18% and 26%, respectively, since they bottomed out in August, when the total amount of negative-yielding debt around the world peaked at $17 trillion. And they're still well below their highs, so they might have more room to run.
Given what Grant observed, it looks like there's substantial room for valuations to rise, too, putting a tailwind behind European bank stocks. And maybe, if the ECB takes the Riksbank's cue, banks will start earning better returns on equity as yields on securities and loans rise.
It seems likely that a year of stellar performance by European bank stocks would surprise the market, but it doesn't seem to be entirely out of the question."