Business & Investment

Eurozone banks are booming after 15 rough years. Will the ECB erase the rally?

For the big eurozone banks, 15 years was a pretty rough year.

The bad times were terrible — the 2008 financial crisis, the Greek debt crisis, and now the COVID-19 pandemic. However, lenders in groups of 27 countries faced the backdrop of negative interest rates and stagnant local economies, and even good times weren’t that great. Eurostocks Bank Index from 2007 highs to 2021 lows

89% collapsed.

But suddenly, a group led by BNP Paribas in France came to life.
Banco Santander, Spain
Italian Intesa Sanpaolo
+ 0.07%

And Dutch ING
Thanks to the rise in bond yields.France 10-year yield

Currently flirting in the positive territory on a regular basis, and Goldman Sachs expects German benchmark band yields

What was negative for almost two years could reach zero by the end of the year. The sector has grown 71% since October 29, just before the US presidential election.

It was bad news for eurozone banks, and even worse.

So the question is whether this bounce is real. There were other times when this sector rose significantly. Especially in 2009, it rose sharply before it turned down.

And there is the power to oppose. Rising bond yields, unlike the US Federal Reserve, have sparked anger at the European Central Bank, which feels the move could hinder economic recovery. ECB President Christine Lagarde, Chief Economist Philip Lane, and Board Member Isabel Schnabel are all warning the rise.

The ECB meeting on Thursday will give Lagarde another opportunity to discuss rising bond yields, even if he does not announce his actions. Analysts say the central bank still has enough firepower under its existing authority to initiate bond-buying activities under a pandemic emergency purchase program.

Nick Kounis, head of financial markets research at the Dutch bank ABN AMro, said the current yield is where the ECB has accelerated purchases in the past. “We believe that increasing the pace of net worth purchases is the point of the ECB’s first and most obvious call,” he said.

Therefore, the active ECB can jeopardize the initial recovery of eurozone bank stocks.

“They are cheap, the question is whether the value of style continues to gain some grip and is helped by the cyclical recovery of European banks. Nordea Asset Management Senior Macro Strategist SebastienGaly said: Stated.

Eurozone banks talk more than bond yields. According to Morgan Stanley data, dividend payments are virtually banned by the ECB until the end of September, but analysts are now raising expectations for payments.

And, as Garry said, evaluation is not demanding. According to FactSet, eurozone banks trade at 0.6 times their book value. Compare with the United States where SPDR S & P Bank ETF is issued.

The price-to-book value ratio is 1.2.

Eurozone banks are booming after 15 rough years. Will the ECB erase the rally? Eurozone banks are booming after 15 rough years. Will the ECB erase the rally?

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