Eu Bank Stocks To Move Lower

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Eu Bank Stocks To Move Lower

European Bank Stocks To Move Lower - Deutsche Bank

According to Deutsche Bank, the European bank stocks had a great year 2024. However, things will change in 2025 as this sector is expected to go through a downturn.

It's been 4 consecutive years since the European bank stocks continued to outperform the regional market. The only exception was a weak December, which was mostly due to the higher EPS grades.

Eu Bank Stocks Up By 29%

Overall, the EU bank stocks have gained almost 29% YTD, which is a lot higher than the 10% gains in STOXX 600. Amidst all of this, experts believe that 2025 will be the first negative year for the EU banking sector.

But why? It has to do with the ongoing rate cuts by the European Central Bank, which have also affected the earnings of these banks. There's no doubt that net interest income will take a hit as the banks will be earning less on loans.

However, the profitability of banks is still very high when compared with the standards of post-GFC. But, that doesn't mean we can ignore the fact that earnings momentum will take a hit next year.

That's why the Deutsche Bank has issued a negative outlook for the first time in 5 years. According to them, they are negative about the overall European banking sector.

In an environment like this, Deutsche Bank believes that certain stocks will still deliver good performance. These banks will have a better income due to their hedges and exposure to different growth regions.

Some banks which could prove to be outliers are Barclays, Commerzbank, and Santander. However, it would still be too soon to say anything as there's still a lot of uncertainty.

However, one thing is certain and that is the interest rates are going down in the Eurozone. With inflation dropping to normal levels, there's no reason to keep the rates at such elevated levels.

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