London — European banking stocks were meant to shine in 2023.
European shares are trading at about 0.65 times their price-to-book value, according to Refinitiv Datastream. Reflecting concerns over the stability of the sector, bank shares are set for an almost 15% monthly drop in March, after five consecutive months of gains. Investors are now forecasting that banks themselves will tighten lending standards and pay more to secure deposits as the rumblings that began in the US banking system pressure institutions in Europe to demonstrate that they are well capitalised.
“Traders will wait to see a bit more stability before they add more money to these [bank] stocks. A lot of people just want to make sure that the contagion fears abate before jumping back in,” said Patrick Spencer, vice-chair of equities at RW Baird. This view was echoed by Amundi, which said that the liquidity profile of European banks “still appears very robust with less competition from money market funds than in the US”.