With rates potentially peaking, how are we viewing European bank valuations? Many still trade at discounts to book value. Is the discount justified by lingering NPL concerns or regulatory overhangs, or is there a genuine value play emerging?
I'm leaning towards a value play, honestly. NPLs are definitely something to watch, but the general economic outlook in Europe isn't as dire as some make it out to be. There's potential.
I've been nibbling at a few names, particularly those with strong domestic franchises and less exposure to the more volatile European economies. It's a calculated risk.
Discounts to book value have been a thing for European banks for years. What makes this time different? Just peaking rates isn't enough to change the fundamental narrative for me.
Good question. I think it's a bit of both. Some banks are genuinely undervalued, but others have very real structural issues that explain the low multiples.
Are we sure rates have peaked? If they continue to rise, even slowly, those NPL concerns could become more prominent, especially for more exposed lenders.
The regulatory overhang is the biggest issue for me. Until there's more clarity on capital requirements and resolution frameworks, those discounts feel pretty justified.