European lenders top Q3 forecasts as buybacks reassure investors

what happened

Several large European lenders reported third-quarter earnings above expectations on Wednesday, according to Reuters. Deutsche Bank, BNP Paribas and Santander all came in ahead of forecasts, and UBS brought forward the completion of its share repurchase plan, which eased concerns that the multi-year rise in bank profits is running out of momentum. Standard Chartered went further and raised its income and profitability targets after its profit comfortably topped estimates, supported by wealth management and global markets.

Investors had grown nervous beforehand. Bank shares in Europe had dropped about 10% in the month before the open, over exposure to euro zone government debt and a softer economic outlook. HSBC's weaker-than-expected results on Tuesday added to the unease, and some analysts see slowing interest income and rising competition for deposits as signs that the lift from higher rates may be near its peak. At the open, Deutsche Bank rose 3.5% and Standard Chartered 4.6%, while UBS fell 1.7% and Santander slipped 3.4%, the latter on weaker earnings in Brazil. The Europe banks index was flat.

why it matters

Strong results raise the bar for the whole sector, but the flat index reaction shows investors want banks to outperform the wider market. Direction of rates and the effect of the Iran war on inflation remain the main factors to watch.

market impact

European banks: earnings beats and buybacks support the sector

• ▲European bank shares pressure up — earnings above forecasts and share buybacks support prices

tags

instruments