• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Financial Services

5 Top Bank Stocks in Europe to Own, According to Strategists

As the eurozone recovery gains traction, here are five bank stocks to look at.
By ANTONIA OPRITA Jan 11, 2018 Updated Jan 11, 2018 | 11:12 AM EST
Stocks quotes in this article: SAN, EZU, ABNRY, EBKDY, LYG, CRARY

Investors hope that the beleaguered European banking sector will finally see the light this year, as the European Central Bank (ECB) slowly removes its stimulus and the economy keeps strengthening. This would, in theory, allow interest rates to increase gently, which would ultimately benefit the banks as they would be able to make more money from lending out their funds.

An index of major European banks compiled by FactSet shows their share prices have been increasing in step with global stocks in the past couple of months. In terms of valuation, European banks still look cheap versus other stocks, with a forward P/E of just 11.7 compared with 16.4 for global stocks.

The ECB has halved its monthly asset purchases to €30 billion ($35.8 billion), but as part of that, it has kept corporate bond purchases unchanged at €10 billion. This is still plenty of support for the euro area's economic recovery.

An indicator measuring investor optimism regarding the situation in the eurozone increased to the highest level in more than a decade in December, according to data released on Monday. And on Thursday, Jan. 11, data out of Germany showed that the single eurozone's biggest economy expanded by 2.2% in 2017, better than the 1.9% growth it posted in 2016.

Analysts expect this pace of growth in Europe to continue this year as well. For investors who are seeking to diversify away from U.S. banks -- especially after this must-read detailed interview to Real Money's sister website The Street, in which Minneapolis Fed chief Neel Kashkari lays out research suggesting U.S. banks' capital requirements should be raised -- it is time to check out Europe's financial institutions.

Equity strategists at Societe Generale have three main themes for this year when it comes to banks in Europe: their capital situation, the potential for upgrades in earnings per share, and the potential for re-rating, or positively reassessing the companies' potential.

Here are their five key buy recommendations:

Spanish bank Santander (SAN) , which is one of the top holdings in the iShares MSCI Eurozone ETF (EZU) that is a held in the Action Alerts PLUS charity portfolio that Jim Cramer co-manages, is the first on their list.

Santander's capital is improving and getting close to gaining more flexibility, while its EPS upgrade potential is driven by a turnaround in its Brazilian operations and synergies from the acquisition (or, rather, rescue) of Spain's Banco Popular last year, in the opinion of the strategists as Societe Generale.

Their second pick is Dutch ABN Amro (ABNRY) , the highest capitalized bank in the Benelux countries. The bank's EPS are likely to benefit from improved profitability in its commercial and investment banking operations, as well as from improved asset quality. It has strong loan growth and further improving credit quality to support its profitability.

Third is Austrian Erste Bank (EBKDY) , the lender focused on Central and Eastern Europe. It has a robust capital position and margin uplift from higher interest rates in the Czech Republic, and sustained growth in volumes which is "amplifying impact on revenues".

Moreover, the bank has taken structural measures to improve its efficiency and will likely benefit from digitalization, the strategists said in their recently published research.

British bank Lloyds (LYG) , the U.K.'s biggest mortgage lender, is fourth on their list. The bank has an 8-10% free capital generation rate per year and the pricing of its U.K. products is starting to improve, the strategists wrote.

The Bank of England finally lifted its interest rate by a quarter of a percentage point to 0.5% in November last year, the first hike in more than a decade, which helped put a floor under banks' own mortgage rates. Restructuring at Lloyds after the financial crisis is "largely complete", and the bank is now starting to deliver domestic earnings and capital return, the strategists wrote.

A French bank concludes their Top 5: Credit Agricole (CRARY) , the best capitalized name in France. Its EPS upgrade potential is boosted by better volumes and credit quality trends, while investment in saving management and in Italy show potential for a positive reassessment of the name.

Societe Generale's buy recommendations generally have an absolute total return forecast of 15% or more over a 12-month period, consisting of forecast share price appreciation, plus all forecast cash dividend income, including income from special dividends, paid during the 12-month period.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Employees of TheStreet are restricted from trading individual securities. Societe Generale is an investment bank and may have positions in any of the securities mentioned.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long EZU.

TAGS: Investing | U.S. Equity | Financial Services | Economic Data | Markets | Economy | Interest Rates | How-to | Risk Management | Stocks

More from Financial Services

The Best House in This Neighborhood Is on Sale

Brad Ginesin
Jun 24, 2022 12:15 PM EDT

The buying opportunity here below book value is compelling.

Affirm: Will Investors Buying Now, Pay for It Later?

Bruce Kamich
Jun 22, 2022 3:12 PM EDT

Let's see what the charts and indicators suggest.

American International Is Breaking a Longer-Term Uptrend Line

Bruce Kamich
Jun 13, 2022 1:51 PM EDT

Is there more risk than reward?

Investors Are Losing Interest in Mortgage Lenders as Interest Rates Rise

Ed Ponsi
Jun 9, 2022 8:30 AM EDT

The charts of a number of the nation's largest mortgage lenders indicate more pain to come for holders of those stocks.

Looking to Lehman for Lessons About Today

Ed Ponsi
Jun 2, 2022 10:00 AM EDT

Let's review what happened to this financial giant in 2008 and what it could tell investors about the current market.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 04:51 PM EDT PAUL PRICE

    We Should Be in for Better Starting Soon

    Window dressing Thursday, the last day of the...
  • 11:56 AM EDT STEPHEN GUILFOYLE

    Stocks Under $10

    Check out what's going on in the Stocks Under $10 ...
  • 12:04 AM EDT PAUL PRICE

    Two Good Signs -- Especially for Small-Cap Investors

  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login