2022 may be the year of the Eurozone banks, despite the ECB not planning to raise the key interest rate. However, cheap valuations, strong earnings, and lower-than-expected provisions for losses on loans make Eurozone banks an attractive bet.
The new year started with financial market participants projecting diverging monetary policies on the two sides of the Atlantic ocean. On the one hand, the Federal Reserve of the United States plans to start tightening financial conditions considerably. But on the other hand, the European Central Bank has no intentions of lifting the key interest rate in 2022.
The two divergent monetary policies may make US-based financial institutions more attractive than their European peers. However, Eurozone banks deserve a place in the 2022 portfolio for at least a few reasons.
First, they trade at cheap valuations. Second, continued lower-than-expected provisions for losses and loans will lead to the rise of return on equity. Third, 2022 and 2023 consensus earnings have been revised upward. Finally, dividend distributions and shares buybacks are expected to increase as a result of the European Central Bank removing the capital distributions limits in September 2021.
Here are three Eurozone banking stocks to buy: Credit Agricole, Deutsche Bank, and ING Group.
Credit Agricole is a French diversified bank with worldwide operations. It pays a hefty dividend – the dividend yield for 2022 is forecast at 7.53% and seen at 3.97% by 2024.
Besides the rising dividend yield, Credit Agricole's stock price may seem attractive judging by the P/E ratio of only 8.27.
Deutsche Bank is one of Europe’s largest investment banks. It employs over 80,000 people worldwide and was founded in 1870.
Revenues are expected to be EUR24.38 billion in 2022 and to rise to EUR25.45 by 2024. Moreover, the dividend yield for 2022 is seen at 2.97%, forecast to reach 3.94% by 2024. Just like in the case of Credit Agricole, Deutsche Bank’s P/E ratio is attractive, at only 8.09.
ING is a diversified bank from the Netherlands. With worldwide operations, it employs 57,000 people.
This is another European bank with a high dividend yield – 5.69% in 20222. Also, the P/E ratio for 2022 is seen at 10.13. ING’s revenues grew faster than the sector median YoY by 41.78%.