Investment theme: Banking and Financials
The current sector valuation is discounting based on an adverse scenario for European banks, e.g. even stronger regulations, capital increases, etc. On average, balance sheet quality has improved a lot during the past 2 years, and European banks have the potential to surprise in a positive way.
In the US banking sector, valuations are on average already fairly over stretched and there is room for disappointments (see results of JP Morgan).
Our list of favorites:
| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| BNP Paribas | BNPP | Banking | 23.1 % | 5.18 |
| Investment case: BNP has a solid retail customer base in France, Italy and the Benelux. Medium-term investors are offered an excellent risk/reward opportunity. | ||||
| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| UBS | UBSN | Banking | 12.9 % | 4.58 |
| Investment case: During the next investor update, UBS is expected to outline how it plans to achieve its targeted cost/income ratio of below 70%. A positive take-up by the market could propel the share price into the low 20s. | ||||
| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Swiss Re | SREN | Reinsurance | 21.4 % | 6.28 |
| Investment case: Swiss Re is a key player in the reinsurance market. It has a well-diversified portfolio of assets, and its business exposure to Asia makes the company particularly interesting. The payment of dividends generates a technical short-term correction and could be used for adviced investors for the build-up of a position. | ||||
| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Intercontinental Exchange | ICE | Investment Services | 18.6 % | 5.66 |
| Investment case: ICE is implementing a cost-cutting strategy. A total of up to USD 100M could be gained from exploiting synergies and from the disinvestment of Euronext. Once completed, results could be used to proceed with a share repurchase program. | ||||
| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Simon Property | SPG | Retail REIT | 18.6 % | 5.66 |
| Investment case: The group intends to spin off some malls and smaller units. Disinvestment could reveal some surprises to the upside, hence an increase on EPS and eventually the implementation of a share repurchase programme. | ||||