Investments VA-Bank: should you buy shares of European banks


The results of the first round of the presidential elections in France, which took place on Sunday, April 23, provoked a sharp increase in the shares of European banks. Since the announcement of the voting results, the index of the banking sector the Euro zone Euro Stoxx Banks, including paper 26 of the largest credit institutions increased by 7.66% to 134,57 points. The next day after the elections, the indicator jumped from 7.5%. Now it is trading at the highest level since December 2015. For comparison, the broad market index Stoxx Europe 600, after the French elections increased by only 2.8% to 388,57 points.

As noted by interviewed experts, investors staged a rally in the shares of the banking sector of Europe, due to the reduction of risks associated with the possible victory of eurosceptics in the French elections. In the first round of voting, the favorite in the presidential race was a centrist Emmanuel macron, who scored 23% of the vote. Its main competitor — the leader of the party “national front” marine Le Pen, who has repeatedly stated about the possibility of the withdrawal of France from the Eurozone, has received 21% of votes. “The victory of marine Le Pen could face large-scale changes that have affected and banking sector. This factor has hampered the growth of the shares of European banks before the voting”, — says head of Department of trading operations IK “freedom Finance” Igor Kleshnev.

The asset Manager of UK BKS Nikita Emelyanov adds that the banking sector became the main beneficiary of the first round elections in France. Besides the voting results of a powerful support factor for him was the rhetoric of French politicians. “Almost all the candidates who have not passed the second round was supported by Makron. Now the chances of his victory is about 70%, even despite the small gap in the first round,” — says the financier. According to him, the victory of the Macron means the most positive scenario for the European stock market, therefore increasing its probability contributes to the growth of quotations at stock exchanges of the EU.

The favorites of the market

Among the stocks of credit institutions that are included in the calculation base index Euro Stoxx Banks, the greatest growth was in paper Italian banks UniCredit and Ubi Banca. Since the opening of trading on 24 April, they rose by 14.49, respectively 12,39%, to €15,57 €3,99 a piece. They are followed by action, the German Deutsche Bank, which has increased in price by 11.1% to €17,32, and Spanish Natixis his quotes went up by 10.54%, to €6,4. Paper French Credit Agricole rose by 10.26%, to €13,76, Bank Societe Generale — by 9.38%, to €50,73, and Germany’s Commerzbank is at 9.1%, to €9,07. A little less rose quotes the Austrian Raiffeisen Bank and the Italian Banco Popolare — 8.9 and 8,76%, to €20,93 €2,73 respectively. Securities of other credit organisations of Bank of the Eurozone showed growth in the range of 8.55 to 1.92%.

The predominance of Italian, not French banks in the list of stock gainers due to the special vulnerability of the financial market in Italy prior to any event that threatens the integrity of the European Union, writes in its review, Goldman Sachs analysts. Last week the international rating Agency Fitch even downgraded Italy’s credit rating from BBB+ to BBB with “stable” Outlook due to the weakness of the banking sector and huge levels of public debt. Once the factor of risk associated with the possible victory of Le Pen, came to naught, Italian stocks showed an even more powerful rally than the French market, according to a survey by Goldman Sachs. However, given that the quotes UniCredit in anticipation of the elections in France has been steadily falling since the beginning of the year to 24 April they had declined to 51 and 43%, their current dynamics more reminiscent of a short-term upward correction.

Is it worth to invest

According to Igor Kleshnev, the further dynamics of the banking sector will largely depend on the outcome of the second round of presidential elections in France, which is scheduled for may 7. However, until that day, shares of European banks should increase, he said. This makes them a good option for speculation. But investment in the banking sector in the long term Kleshnev inappropriate. “In the coming year, the EU markets should grow, but I can’t say that the banking sector will be the driver of growth. Given the stimulus of the ECB, Bank stocks you can buy without special fanaticism. I would not advise to keep them for more than 10% of their portfolio,” — emphasizes the financier.

Agrees a senior portfolio Manager of the criminal code “Kapital” Vadim Bit-avragim, who notes that the shares of European banks look too expensive. Given the large volume of bad loans — especially on the balance of Italian banks, the fundamental reasons for long-term growth of quotations there. Speculators Bit-avragim advises to pay attention to a greater extent on French banks and less Italian. “Large banks like Deutsche Bank also remain attractive,” he adds.

Analyst “Discovery Broker” Andrei Kochetkov, on the contrary, inclined to believe that the rally in banking stocks is already over — growth in their prices has slowed. According to experts, the situation with European banks follows the story of Brexit and falling of pound sterling 20% — after the situation on global markets have stabilized, the British currency has moved quickly to growth. Now the same paper of European banks had long been under pressure, and after the election showed correction.

However, this year there is a possibility of tapering stimulus programs of the ECB, adds Kochetkov. It may have a negative impact on the European market, but because of rising bond yields, banks will feel better in other industries. Investors who rely on such a scenario, the analyst advises to wait for the euphoria around the outcome of the first round of elections will come to naught, and buy stocks at more attractive prices than now.

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