@MaxinvestEscudo's post on eToro.com
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European Banks are strong long term BUY.
With the end of negative rates in Europe, Banks are the key beneficiaries and have underperformed for the last 5yrs (see chart 3). However, this will require time to be reflected in earnings and stock prices.
Banks generate earnings on a spread, the difference between what they charge (interest) for loans above the cost of paying interest on deposits and borrowings. Plus, fee income and other service revenue like brokerage, investment banking etc.
Rates in Europe will likely rise to 1.5% or 2% and allow banks to raise rates on loans and increase this spread called Net Interest Margin (NII) that can drive earnings substantial in the next 3yrs.
There are a few moving parts that dictate how fast a bank can benefit from higher rates. The first is the average duration or time that its loan book matures and can be repriced. On average this a 3yr process.
The other is the duration of its deposit base, this in general is under 1yr time frame. So, it lik
