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Keep calm and keep your carry on

Banks’ fundamentals are the strongest in a decade. CET1 ratios are almost at their all-time high, profitability is on the rise and return on equity is finally above cost of equity. Despite all this, investors still benefit from significant spread pick up on financial bonds, and especially AT1s. In this context, what should we expect for bank credit in 2024?

In this note, we discuss the following themes: 

▪ Fundamentals: should we be afraid of falling rates? Or are rising rates the threat? 

▪ Regulations: are there any new regulatory discussions we should be aware of? 

▪ We are in 2024 now, what is happening on Legacy bonds? 

▪ Should we expect upgrades or downgrades? 

▪ Valuations and relative value ▪ What are the possible curve balls?