- "Irrespective of the outcome of the banking sector stress tests, the fundamentals of the European banking industry have improved considerably over the past several months."
- "Balance sheets are expanding again as a result of new loans, and improved values for banks’ debt securities and these trends are dominating a ‘late cycle’ increase in traditional loan losses."
- "Banks have been raising capital so that leverage ratios have declined below their trough in the last cycle.""
- "Given these improving trends, this is an odd time for the market to become overly concerned by ‘stress’ scenarios. There are still institutions that will need to be recapitalised, and it is important that these weak links are dealt with transparently, but the ‘big picture’ is one of incremental improvement."
- "In the final analysis, European banks remain closely tied to the condition of the wider economy. With recent data surprising on the upside, there are grounds for mild optimism here too."
- "With European banks trading on 0.9 times their reported book, and other ‘cyclicals’ on 1.9 times, we continue to recommend an overweight position, whatever the outcome of the stress tests."
Nomura European Strategy Weekly 20100723
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