European banks earnings to show impact of external factors

This week, Europe’s largest banks will announce their second-quarter earnings, focusing on whether gains from higher interest rates have peaked and if political events are impacting market sentiment.

Despite the European Central Bank (ECB) expected to cut interest rates in September, bank earnings have remained strong. JP Morgan analysts predict net interest income (NII) will stay robust, but caution that there is “no tolerance for NII disappointment.”

Key reports include Santander, BNP Paribas, Deutsche Bank, and UniCredit on Wednesday, with Lloyds, NatWest, Barclays, and HSBC following.

Sabadell’s results on Tuesday will be closely watched amid a takeover bid from BBVA. Spain’s Bankinter recently raised its 2024 NII outlook, boosting shares.

European bank shares have surged 20 per cent this year but still trade below tangible book value. Investors are concerned about profit sustainability and potential political shifts in France, affecting banks like BNP Paribas and Societe Generale.

Investment banks are expected to benefit from higher underwriting and advisory fees, with strong equity trading revenue anticipated. However, Deutsche Bank is forecast to report a second-quarter loss due to an investor lawsuit, breaking a 15-quarter profit streak.

Attribution: Reuters.