Here are the discounted European banking stocks to buy now, following record growth in profitability and market valuations over the past two years.
In 2024, European banks could return over €50 billion to shareholders, more than double the pre-pandemic levels, but after the exceptional rise in stock market valuations, investors are divided: should they focus on financial giants that offer significant returns but with a downside risk, or explore other options with more attractive valuations? According to experts, it is better to avoid overvalued banking stocks, such as Unicredit, Intesa Sanpaolo or Caixabank, or stocks at the center of Berlin’s anti-debt moves, such as Commerzbank.
- European bank sector graph
- Source: Bloomberg
Here are 3 discount stocks to buy now, in anticipation of a decline in profits in the coming years linked to the end of the restrictive interest rate cycle.
1. Banco Santander
- Banco Santander graph
- Source: Tradingview
Banco Santander is one of the 3 stocks to buy now, thanks to its solid financial position. The Spanish bank’s shares are currently trading at €4.328, a discount rate of 30% compared to the fair value of €6.20 set by UBS analysts. This discount highlights an attractive investment opportunity, supported by the bank’s funding structure, which favors customer deposits over institutional financing, reducing overall risk. One of Banco Santander’s strengths is its cost/income ratio, which is the ratio between operating costs and intermediation margin, among the lowest in Europe, reflecting the bank’s operational efficiency.
Another positive factor is the geographic diversification of its operations, with a strong competitive position in Brazil, Mexico, and Chile, and low exposure to investment banking and mortgages, whose earnings tend to be very volatile.
2. Ing Groep
- Ing Groep graph
- Source: Tradingview
Ing Groep shares are trading at a discount rate of 20% compared to the fair value estimate of €20, calculated by Berenberg. According to experts, Ing is among the bank stocks to buy now thanks to its strong competitive position in Dutch retail banking. In particular, Ing is the market leader in Dutch current accounts with a market share of 40%.
Furthermore, the Amsterdam-listed bank stands out among the best European high-dividend stocks, with a dividend yield of 6.81%.
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3. Lloyds Banking Group
- Lloyds Banking Group graph
- Source: Tradingview
Lloyds Banking Group is the last of the 3 stocks to buy now in the banking sector, with a discount rate of 10% compared to the fair value estimate of 63 pence. The UK bank, which embarked on a major restructuring in 2011, has established itself as a low-risk retail and commercial bank, with 95% of its assets concentrated in the UK.
In the first half of 2024, falling interest margins reduced pre-tax profit to £3.32 billion, which was still better than expected. Lloyds’ outlook therefore remains strong, with the bank targeting a return on tangible equity (ROTE) of around 13% for 2024 and above 15% by 2026. The bank also intends to maintain a CET1 ratio of around 13.5%, above the minimum regulatory requirements.
Despite caution from Berenberg, which maintains a “Hold” rating on the stock with a 55p target price, the outlook for Lloyds shares is bright.
| DISCLAIMER The information and considerations contained in this article must not be used as the sole or main basis for making investment decisions. The reader retains full freedom in his or her investment choices and full responsibility in making them, since only he or she knows his or her risk appetite and time horizon. The information contained in the article is provided for information purposes only and its disclosure does not constitute and should not be considered an offer or solicitation to the public to save. |
Original article published on Money.it Italy 2024-09-04 17:13:17. Original title: Banche, 3 azioni a sconto da comprare subito
