Europe’s Bank Stock Rally Threatened by Macron’s Election Call
Posted: Sat Jun 22, 2024 10:18 pm
Europe’s Bank Stock Rally Threatened by Macron’s Election Call
Read more here:
https://www.bnnbloomberg.ca/europe-s-ba ... -1.2087929
(Bloomberg) -- For much of 2024, European bank stocks were the leaders of the region’s equities rally. Then French President Emmanuel Macron threw a spanner in the works.
Since Macron called a snap election on June 9, lenders’ shares have slumped, relinquishing their position as Europe’s top-performing sector of the year. Investors who had championed banks’ high margins and hefty dividends are now trimming exposure, concerned about the sliding value of big holdings in French sovereign debt.
“The only main adjustments we’ve made in this context was to trim our exposure to French banks by 10% to 15% to manage portfolio volatility,” said Gilles Guibout, a portfolio manager at AXA Investment Managers.
The problem is that an election win for either the far-right or left — both ahead of Macron’s party in polls and promising bigger spending — could strain the country’s stretched public finances, leading to higher financing costs for banks. Each small increase in short-term funding rates could knock around 2% off earnings for French banks, according to analysts at Keefe, Bruyette & Woods.
The concerns have led to a selloff in French sovereign debt, of which the country’s banks held around €584 billion ($624 billion) as of December, according to Natixis Research. Societe Generale SA was the most exposed, and that’s the stock hit particularly hard by the fallout, down 19% in June.
Read more here:
https://www.bnnbloomberg.ca/europe-s-ba ... -1.2087929
(Bloomberg) -- For much of 2024, European bank stocks were the leaders of the region’s equities rally. Then French President Emmanuel Macron threw a spanner in the works.
Since Macron called a snap election on June 9, lenders’ shares have slumped, relinquishing their position as Europe’s top-performing sector of the year. Investors who had championed banks’ high margins and hefty dividends are now trimming exposure, concerned about the sliding value of big holdings in French sovereign debt.
“The only main adjustments we’ve made in this context was to trim our exposure to French banks by 10% to 15% to manage portfolio volatility,” said Gilles Guibout, a portfolio manager at AXA Investment Managers.
The problem is that an election win for either the far-right or left — both ahead of Macron’s party in polls and promising bigger spending — could strain the country’s stretched public finances, leading to higher financing costs for banks. Each small increase in short-term funding rates could knock around 2% off earnings for French banks, according to analysts at Keefe, Bruyette & Woods.
The concerns have led to a selloff in French sovereign debt, of which the country’s banks held around €584 billion ($624 billion) as of December, according to Natixis Research. Societe Generale SA was the most exposed, and that’s the stock hit particularly hard by the fallout, down 19% in June.