Analysts at Citi have cautioned that European bank stocks are approaching the end of their current bull run, with limited upside remaining despite robust recent performance. The firm maintained an overweight stance on the sector but flagged emerging caution signals as valuations stretch.
The assessment comes as major European lenders have posted outsized returns over the past year. HSBC Holdings (HSBA) led gains with a 58% advance, followed by Banco Santander (SAN) at 56% and BNP Paribas (BNPP) at 31%. Year-to-date, HSBC is up 28.1%, Santander 26.3%, and BNP Paribas 31.4%. UBS Group (UBSG) has risen 17.5% this year, while Deutsche Bank (DBKGn) gained 4.7%.
Technical indicators reflect mixed signals. HSBC’s daily Relative Strength Index (RSI) stands at 50.4, a neutral reading, though its 52-week range spans £943 to £1,610, leaving it just 5.7% below its peak. Santander’s monthly RSI is at 82.9, indicating overbought conditions, while BNP Paribas’ StochRSI is at 13.8, suggesting oversold territory. Deutsche Bank’s Daily Commodity Channel Index (CCI) is at 271.2, signaling extreme overbought conditions.
Macroeconomic headwinds are intensifying. ECB board member Isabel Schnabel warned on August 26 that interest rates may need to rise further due to geopolitical tensions in the Middle East and a resilient eurozone economy. Money markets are currently pricing a 25 basis-point hike in September.
Corporate developments are also in focus. BNP Paribas is pursuing a $2 billion stake in Vietnam’s Techcombank, while Banco Santander admitted 329.8 million new shares to the London Stock Exchange. The moves underscore ongoing strategic shifts within the sector as banks navigate a shifting interest-rate landscape and regional growth opportunities.
