Profit drivers

The outlook for European banks is improving due to a combination of higher interest rates ( hence higher net interest income for the banks ) and lower provisions. As the energy crisis is fading for the moment, fears of an imminent deep recession are also abating. Today’s graph illustrates the mechanics bringing the estimated return on tangible equity for the sector from 9.9% to an estimated 12.8% in 2024. The sector still trades at a Price / Book below 1. We start to warm up to the sector and are currently invested into 3 European banks with very specific investment cases.