Short European Banks Thesis

Short European Banks Thesis by FASANARA CAPITAL

Here below, we update our views on negative rates and our consequential short European Banks equity and sub debt thesis. In a nutshell, we think that not only no bank is ever designed to survive in an environment of deeply negative rates for a prolonged period of time, but their business model is further impaired by negatively sloping interest rate curves. In a twisted unwelcome side-effect following ECB meeting, curves are ever closer to inversion in Europe. They recently became inverted in Japan, for the first time since 1994.

Drivers below, in no particular order:

1. Deeply negative interest rates for a prolonged period of time.

Banks’ business model is at risk. If deeply negative interest rates is the...