European banking shares were upgraded by Goldman Sachs Group Inc analysts, who said they anticipate a boost in liquidity and profit from the European Central Bank’s (ECB) three-year loans.
The banking industry was raised to “overweight” from “neutral,” according to a Goldman note to clients dated March 1. Even after this year’s gain by shares of the region’s lenders, the stocks are still not expensive, analysts including Matthieu Walterspiler and Sharon Bell wrote.
“The LTRO funding has improved liquidity and effectively removed, over the medium term, the likelihood of a major bank failure in Europe,” according to the analysts, referring to the ECB’s long-term refinancing operation. It “will help sector pre-provision profits, while banks still trade at a reasonable multiple of book value.”
The Frankfurt-based ECB doled out euro 529.5 billion ($701 billion) to some 800 banks, surpassing economists’ median estimate of euro 470 billion in a Bloomberg News survey.
