Even amid financial stress, banks are leading earnings growth in Europe
It might be counterintuitive in a year that has seen a series of US bank failures and the demise of 166-year-old Credit Suisse – but banks are driving earnings-per-share growth in the basket of large-cap European stocks tracked by Macrobond and FactSet.
As the sectoral breakdown in our chart shows, aggregate EPS is up 12.5 percent. Industrials are the second-biggest contributor to that gain after financial stocks. Energy is the largest negative contributor.
The end of the zero-interest rate era means banks are making more spread on their core lending business. ING of the Netherlands became the latest big European bank to beat profit forecasts this week.
And as Bloomberg News recently wrote, smaller European banks have been more tightly regulated; larger banks have mostly been cutting their US exposure; and European banks don’t face the same level of deposit competition from money-market funds as US banks do. So far, Credit Suisse is seen as an idiosyncratic one-off.