30/05/2022 18:02
Slowing growth, easing inflation and higher rates. This is the challenging scenario that European banks will face in the near future. According to Goldman Sachs, banks will be trapped between two opposing forces: on the one hand, thehigher rate assistson the other i risks related to stagflation or short-term recession.
The interest rate scenario should drive higher revenues, especially for UniCredit, where higher revenues and earnings should support the € 16 billion return on equity target for shareholders (equal to around 70% of today’s market capitalization). For Intesa Sanpaolo Goldman’s expectation is that higher rates will more than offset the pressure on fees, while the NeoBank “Isybank” has the potential to transform returns in the retail sector. Isybank is seen as one of the most forward-looking fintech strategies among European financial firms.
Goldman has started the hedge on Intesa Sanpaolo with a buy rating and target price set at 3.25 euros. Launch of hedging with buy rating also on Unicredit and target price of 18.50 euros.
KBW also speaks out on the two big Italian banks
Keefe, Bruyette & Woods (KBW) also expressed its opinion on the two major Italian banks, updating the estimates of the credit institutions under its cover and also revising the rating and evaluation on the two big banks of Piazza Affari. The update incorporates further increases in interest rates, higher operating expenses and the cost of risk. Unicredit is the first choice for European large caps with a target price revised upwards to € 16.1 from the € 13.9 indicated above. KBW raised Unicredit’s EPS estimates for 2022 by 32% and those for 2023 by 18%.
The target price on Intesa Sanpaolo was confirmed at € 2.7, with the recommendation falling from outperform to market perform. However, the target price indicated implies a potential upside of 32% for Intesa. On the major Italian bank, the consensus of analysts clearly sees the ‘buy’ opinions prevail, equal to 22, with 6 holds and only one sell.