Markets Showing Strong Optimism For Spanish Banks

Spanish banks are up between 34 – 63% since the summer, outperforming the rest of the periphery, and the market seems to pricing in a lot of optimism even though Spanish banks still have weak loan growth and a high level of non-performing loans. But this optimism comes from making some fairly strong assumptions about next year’s performance, says Citi analyst Stefan Nedialkov.

Spanish banks performance

“Spanish banks are up 34-63%, outperforming the ESTX BANKS PR.EUR (INDEXSTOXX:SX7E) by 5-35%. What strikes us is that this stellar price performance seems to have been driven almost exclusively by multiples rerating rather than consensus estimate upgrades,” writes Nedialkov. “We argue that the market is pricing in a very healthy dose optimism...