Summary

The speakers highlighting the persistent disconnect between improved fundamentals and market valuations. Despite robust earnings, strong CET1 ratios, and growing capital return programs—particularly through buybacks—banks continue to trade below book value, largely due to regulatory uncertainty and geopolitical concerns. Speakers emphasised that while most banks are well-capitalized and generating solid returns, regulatory headwinds, such as evolving Basel IV implementation and capital distribution limits, are tempering investor enthusiasm.;Stock-specific discussions centered on UBS's post-Credit Suisse integration risks, Deutsche Bank’s ongoing transformation and conservative capital trajectory, and Santander’s solid return potential. BNP Paribas was seen as fundamentally strong but impacted by macro concerns in France. The macroeconomic environment is perceived as relatively stable, with rates likely peaking in Europe, though risks remain from elections and global tensions. Credit quality across the sector is viewed as resilient, with only localized concerns around commercial real estate and SME lending. Overall, investor sentiment is cautiously optimistic, supported by stable guidance and the potential for earnings beats, but longer-term structural issues like margin pressure and regulatory costs continue to weigh on the sector’s re-rating potential.

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