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For a time this year, it looked as if the share prices of European banks were heading into freefall. The US regional banking crisis that began in March triggered widespread worries that lenders across the other side of the Atlantic might be vulnerable. Over a giddy three-week period that month, bank share prices tumbled, with the Euro Stoxx Banks index losing close to 20% of its value.
The storm is beginning to pass, however, and while wider macroeconomic worries mean that lenders remain under pressure, share prices have started to stabilise. In many cases, those investors that stuck with their holdings during the turmoil are starting to move back into the money.
Shortlisted for the banks category in the Citywire Elite Companies Emea Awards are the five lenders – four European and one South African – that top-performing portfolio managers are backing with the most conviction. The winner will be revealed at a gala event in London on 21 June. Here are the five:
Source: FactSet. Price-to-earnings ratio and dividend yield based on 12-month forecast earnings.
Find out more: Citywire Elite Companies Awards
While Absa Group (ZA:ABG) has international offices in London and New York, it is a no-nonsense play on economic growth in Africa, in particular the southern region. Founded in its current form through a three-way merger in 1991, the lender has been active in Africa for more than 100 years.
Headquartered in Johannesburg, South Africa, it was formerly part of the Barclays banking empire, until the group began to stage its exit from the country in 2016, a process that it finally completed last year when it sold off its remaining stake.
Absa is a diversified financial services business – lending to individuals as well as corporate customers and governments – and it operates in 15 countries, mostly through wholly owned subsidiaries.
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FinecoBank (IT:FBK) is a relative newcomer to the financial scene. Founded in Italy in 1999, it is effectively an online and digital operation, although it does have a network of advisers in physical locations.
The group, which has been listed since 2014, offers banking services including accounts and cards, but is best known for its speciality of online trading and investing, offering customers access to a wide variety of financial products, including futures and options as well as currencies and shares. FinecoBank was part-owned by Italy’s second-largest lender, Unicredit, until the bank offloaded its 18% stake in 2019, and has been operating in the UK since 2018.
Solid foundations
Shares in OSB Group (GB:OSB) were trading close to record highs before the US crisis sparked a selloff from which it has yet to fully recover. The UK lender traces its history back to the creation of a building society in Kent in 1898 but it metamorphosed into its current from through a series of mergers and acquisitions, most recently combining with Charter Court Financial Services in 2019. It listed its shares on the London market in 2014.
The group, a constituent of the FTSE 250 mid-cap index, specialises in buy-to-let mortgages, mainly to professional landlords. These account for almost three-quarters of its book of loans and advances, worth £24.2bn at the end of the first quarter.
The bank also offers mortgages to borrowers with patchy credit histories and funds housebuilders and property developers. It outsources operational support, including IT and compliance, to a wholly owned subsidiary in Inda, which helps keep a lid on its costs.
There are several characteristics that have made OSB Group attractive to top-performing portfolio managers. They include its scalable business model, resilient buy-to-let markets and reliable customer base, as well as its strong growth and solid return on capital.
Arguably the least familiar name on the shortlist, Ringkjøbing Landbobank (DK:RILBA) is a traditional financial services business based in Denmark that was founded in 1886. Operating exclusively in the country, it offers a spread of banking services to both individuals and businesses, including Denmark’s pig farmers and fisheries.
Last year, the bank took over a portfolio of private banking customers that was previously run by Skandinaviska Enskilda Banken and agreed a strategic partnership in the area with the northern European lender.
The fifth member of the shortlist is Société Générale (FR:GLE), one of Europe’s biggest full-service banking players that is also active in corporate and investment banking in the US. Formed in 1864 to promote French trade and industry, the group – whose name is often shortened to SocGen – is headquartered in Paris but has a presence in 66 countries, including in Africa, Asia and the Middle East.
The group divides itself into three divisions: French retail banking, including online banking brand Boursorama Banque; international retail banking, which also offers insurance; and global banking and investor solutions, which covers corporate and investment banking, securities services and private banking.
Chief executive Slawomir Krupa took the helm of the business last month, succeeding Frédéric Oudéa, who had been in the top job for 14 years. Krupa, who previously ran the bank’s US arm, built his name through a shake-up to the bank’s risk controls after the €4.9bn of losses caused by Jérôme Kerviel in 2008, in the biggest rogue trading scandal in history.
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