These 4 European bank stocks have risen as strong earnings boost sentiment, should you buy?

By:
on May 16, 2024
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  • Many European banks' share prices are up significantly lately.
  • This is due to a largely successful earnings season, with many better-than-expected results.
  • But should you buy in? And which European bank is right for you?

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European banks are having something of a renaissance currently. Bolstered by a mostly positive earnings season, and by optimism about the EU getting rate cuts soon, many banks on the continent have outperformed lately.

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We take a look at four of the most compelling European banks for investors right now:

  1. UniCredit
  2. UBS
  3. ING Bank
  4. BNP Paribas

1. UniCredit

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The star of the European banking circuit in 2024 so far is undoubtedly UniCredit SpA.

In February, during their Q4 2023 results, UniCredit celebrated their 12th consecutive quarter of profitable growth. In their latest results, Q1 FY 2024 released this month, the company improved on this further. 1 UniCredit boasted of:

Excellent net profit of €2.6 billion up 24% versus prior year and a return of equity of 23%… outstanding shareholder value creation with EPS2 up 42% and tangible book value per share +25%3 year on year.”

Its share price is doing just as well. The company’s stock is up more than 45% this year to date so far, and 8.23% in the last month alone.

The company even got an honourable mention in Bloomberg earlier this year, which said that “this year’s top-performing European bank is primed for further gains of almost 50% over the next 12 months, according to UBS Group AG analysts.”2

2. UBS Bank

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Swiss bank UBS is having an exciting month this May. 

On 31st May, the long-awaited merger of UBS AG and Credit Suisse AG is expected to happen. After this, the company says that it plans a “transition to a single US intermediate holding company planned for 2Q24 and the merger of UBS Switzerland AG and Credit Suisse (Schweiz) AG entities continues to be planned for 3Q24.”3

In its latest results, for Q1 of 2024, the company saw total revenues up 15% quarter-on-quarter (Qo) and 46% year-on-year to $12.74 billion. 

The bank also announced a net profit of $1.8 billion, while also reducing its underlying operating expenses reduction by 5% QoQ.3

3. ING Bank 

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With a share price hovering at around €16.10 currently, ING is one of the more affordable European banks to gain exposure to currently.

But that doesn’t mean it isn’t value for money. This year to date so far, the bank’s share price is up around 20%, and 9.46% in the past month alone. 

Like the others on this list, ING shared positive Q1 2024 results recently. The company saw a quarterly profit before tax of €2,293 million, and total income rose to €5,583 million, up 0.3% YoY and 3.2% higher QoQ.4

This lead to an impressive return on equity. According to the same results, ING achieve a “four-quarter rolling return on equity of 14.8% on higher CET1 ratio of 14.8%”4

The rest of FY 2024 looks relatively sunny too, if ING’s forecast is to be believed: 

Total income in 2024 to remain strong in a positive rate environment, albeit somewhat lower than in 2023. Our aim is to increase fee income by 5% to 10%. Based on the current outlook, a total cost growth of around 3% (excluding incidental items) is foreseen. The CET1 ratio is expected to converge towards our 12.5% target by 2025. Return on equity expected of greater than 12%.” 

4. BNP Paribas 

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Last but not least is multinational bank BNP Paribas, headquartered in Paris. 

BNP Paribas’ share price is ascending rapidly at the moment, up almost 12.7% this year to date – but, it’s also up an impressive 12% in the past month alone. 

The bank’s Q1 2024 results were not as spectacular as the other three’s, with net income largely flat at €3.1 billion, and revenues 2% higher at €46.9 billion. EPS amounted to €2.51 per share.5 

This meant that return on non-reevaluated tangible equity stood at 12.4%.

However, it’s dividend prospectus is worth a look. During the same quarterly earnings announcement, the bank said that “the group finalised its €1.05 billion share buyback programme on 23 April 2024. The Board of Directors will propose a €4.60 dividend to shareholders at the General Meeting of 14 May 2024.”5

BNP Paribas went on to say that: 

On the strength of its 1st quarter 2024 results, BNP Paribas confirms its 2024 trajectory – revenues more than 2% higher than 2023 distributable revenues (€46.9 billion), a cost of risk below 40 basis points and net income higher than 2023 distributable net income (at €11.2billion).”5

Sources:

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1 UniCredit, 2024; 2 Bloomberg, 2024; 3 UBS Bank, 2024; 4 ING banks, 2024, 5 BNP Paribas, 2024

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