European banks' bull run still has fuel in the tank
XLF•Why analysts see more upside
- Continued growth in net interest income (NII) resulting from the steepening of the yield curve
- Non-NII revenue boosted by fees generated by investment banking
- Private banking and wealth management activities continuing to benefit from robust financial market performance
- Efficiency gains
- The return to consolidation
- Focus on improving profitability, which should boost their valuations
BlackRock also sees support from financials
The optimism is shared by Helen Jewell, international CIO, BlackRock Fundamental Equities.
"Financials may provide another source of growth and diversification in portfolios," Jewell says, highlighting that banks may be among the biggest beneficiaries of AI adoption.
European banks' rally could have more room to run
Banks have been one of the best investments in Europe over the last few years, as their profitability was boosted by the end of ultra-low interest rates.
The STOXX Europe 600 Banks Index .SX7P has risen about 280% since the start of 2021 and is up 16% this year.
And analysts at Edmond de Rothschild expect the positive momentum to continue, driven by several catalysts.
