“The US tariffs announcement led to a large sell-off in global equity markets, with European banks underperforming the broader European equity market. We take a look at the drivers of this performance. Given the strong fundamentals of European banks and our view that overall asset quality should remain strong, we consider their current stock valuations as increasingly attractive (…) While banks remain exposed to the economic uncertainty brought about by tariffs, as they are a leveraged macro play, we see the current sell-off as overdone considering the very strong fundamentals of European banks in historical terms. For instance, in 4Q24, the average bank non-performing loan (NPL) ratio, a key indicator of bank asset quality, remained below 2%. This is broadly in line with the previous quarters, very low by historical standards and much lower than on previous occasions when banks entered crises.”
Morten W. Langer
