Citi: European Bank Stock Bull Run Nearing Its End as Valuations Are No Longer Cheap
Nashnova编辑部
Citi warned the European bank rally is approaching its end — valuations are no longer "excessively cheap" and the sector's scarcity edge is fading, though the bank still holds a positive view, favouring ABN, NatWest, and Société Générale.
How much have European bank stocks gained this year?
The STOXX 600 Banks index is up roughly 21% year-to-date, second only to oil & gas (up 31%) among major European sectors.
That gain broadly matches the 22% rise in the US KBW Nasdaq Bank Index, but has slowed sharply from 2025's 66.95% surge.
This means → European banks are still climbing, but the easy-money phase is over — last year nearly doubled, this year barely a fifth.
Q2 earnings were strong — so why is Citi sounding the alarm?
In Q2, 83% of European banks beat pre-tax profit expectations, and "most" raised full-year guidance.
The biggest EPS upgrades came from CaixaBank, HSBC, ABN, and Santander.
But Citi stressed: EPS upgrades are now widespread across other sectors too, so banks' scarcity value is declining.
In plain terms = banks used to be the only game raising earnings forecasts; now everyone is, so the edge is gone.
What could drive further gains from here?
Citi sees future EPS growth hinging on M&A or volume expansion, including new initiatives tied to the AI capex boom.
The catch: this "may come at the expense of buybacks" — and Citi cautioned that buyback support for sentiment and technicals should not be underestimated.
This means → if banks redirect cash toward expansion, buybacks shrink — and with them, a key prop under the share price.
Is Citi telling investors to sell?
No. Citi maintains a positive view on European banks, noting the sector's return on capital still tops every other European sector.
Top picks: ABN (Netherlands), NatWest (UK), and Société Générale (France).
This reflects Citi's read that it is "late-cycle bull, not over" — the decisive question is whether M&A progress and AI-linked volumes can fill the valuation gap left by retreating buybacks.
市场有风险，内容仅供研究参考，不构成投资建议。