Unicredit, Europe’s most discounted bank, is Ubs’ top choice with a gross margin of 31%. this is the reason

Since the beginning of 2022, the Eurostoxx600 index (STXE 600) of the financial sector has lost 5%, recovering some of the losses after the Russian invasion of Ukraine last February, thanks to the ECB’s interest rate hike.

Interestingly, UBS analysts write in a report on European banks that today almost all banks listed in Europe are trading at lower prices than the euro.eps forward, or earnings per share It is planned until 2023.

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A sector in serious decline

The average indicator for the evaluated groups is 5.9 times. given that, explain Ubs analysts, expected loan losses and capital above the ECB’s minimum requirements. At this stage, we can add experts that the sector is trading at a level price/earnings ratio (p/e) 50% discount to marketwhen the long-term mean is reached, 25% offer to generate cash (free cash flow) was 11.3%. and average productivity 7% dividend.

“Overall, the asset class is attractively priced and an economically viable option due to increased cash value and yields associated with a robust market,” Ubs wrote. Analysts expect it central bank rates will arrive in the next four months.

Unfavorable factors for the banking system

While the liquidity provided by the European Central Bank in recent years has been a big factor in reducing funding costs for financial groups and their clients through “operations such as LTROs,” interest rates on corporate-led debt in particular are rising. Ubs reminds. Analysts who assess the negative factors in the financial sector warn that higher funding costs for banks, determined by the market at this stage, are now a limiting factor that will be increasingly felt.

Still, analysts believe there is a consensus forecast interest margin (net interest income) More than three-quarters of European banks are very weak. And they estimate that the period when this difference will cause stocks to outperform will be closer to the 2022 results, which is February 2023, when the data is published. In this sense, the values ​​preferred by UBS are LBG (Lloyds Banking Group), Swedbank and Italy, Unicredit.

Brokers say lower p/e ratios linked to rising official interest rates, rising loan losses and corporate and investment banking (Jib) earnings “will lead to more diversified balance sheets and increased portfolio investment in banks seeking longer-term performance in 2022 justifies”.

According to Ubs, several factors will determine the performance of the sector in 2023, from rising interest rates in the credit market to falling real estate prices and excess capital payments.

What can cause reclassification?

Ubs especially appreciates banks that provide information about banks 2022 revenueswill actually confirm return of capital and guidance for 2023, should improve results

before provisions.

Ubs excludes Caixa Bank, Societe Generale and Standard Chartered from the list of top picks, while Bnp Paribas, Swedbank and Unicredit.

Unicredit, 31% gross income bank.

In a bank headed by a CEO Andrea Orselanalysts have an opinion get and target price €15.5has a potential higher than its current value 24%. Website gross income is expected per share (between dividend and redemption). 31%. The expected P/E ratio will increase by 6 times in 2022, 6.4 times in 2023, and 5.5 times in 2024.

Return on equity (Rote) is 7.9% for 2022.6.5% in 2023, 6.9% in 2024. Analysts alsoexcess capital in the form of market value (capitalization), higher than the requirements imposed by the ECB (11.6%), the Milan bank can distribute at least partially to shareholders. This percentage will be 43% in 2022, 42% in 2023 and 38% in 2024. The bank is trading at 12.86 euros for one euro today. 26 billion Ftse Mib lost 0.35%.

A table in the report then compares Expected p/e for European banks until 2023It is the best rated bank KBC, the third Belgian bank by assets (9.9 times), Crédit Agricole 7 times, Intesa Sanpaolo 6.3 times, Banco Bpm 5.8 times, Bper 5 times, Societe Generale 4.8 times, It shows that Deutsche Bank. 4.4 times. Finally, Unicredit closes the study with an expected price/earnings ratio of 1.5% through 2023. 5.3 times. ()

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