JP Morgan Sticks with European Banks Despite Rate Cycle Turn
JP Morgan has reaffirmed its 'overweight' rating for European banks, citing a perfect environment for growth despite early signs of an interest rate cycle turn.
Analyst Kian Abouhossein pointed to a sweet spot in European Central Bank rates between 2% and 3%, which is supporting lending momentum driven partly by artificial intelligence capital expenditure.
The combination of factors, including strong capital markets performance amid upward-trending equity markets, continued cost discipline, and low unemployment, is expected to drive average pre-provision profit growth of 8.8% per year between 2025 and 2028.
JP Morgan's top picks for European banks include Deutsche Bank, UBS, ING, NatWest Group PLC (LSE:NWG), Standard Chartered, and Erste Group.