European Banks Equities, 2024 Outlook

With inflation running closer to target, central banks in advanced economies are poised to start cutting interest rates. The forward curve is discounting a return to a neutral rate of c. 2.5% in the Eurozone and c. 3.8% in the US. As we enter a new stage of the cycle, we discuss the opportunities we see across European banks equities. 

Here are our 4 main convictions: 

I. The bulk of the rally in long duration is behind us. 

II. European banks equities should outperform the broader European market in all macroeconomic scenarios but a deep recession. 

III. If growth picks up, European banks should rally by 30%+ as their aggregate price-to-book jumps above 1.0 for the first time since 2017 according to our analysis. 

IV. High quality banks with resilient interest rate margins, strong capital generation and superior communication should outperform.

You can find more details in our analysis below.