Sharecast - "We continue with our relatively cautious view on European banks trading at 6.9x P/E, 0.8x TBV for 11.6% return on tangible equity in 2024E," it said.
"With our house view of a recession, JPMe provisions 13% above consensus expectations 2023-24E and historically banks underperforming when provisions increase and outperforming once provisions peak, we remain cautious.
"Our base case valuation is not expensive at 6.9x P/E 2024E; however, in our Stress scenario, we see the sector trading at average valuation of 12.7x P/E i.e. risk-reward is not as attractive assuming historic PE of 9x, in our view."
In a global context, JPM said it still prefers US money centre banks over European Banks post their underperformance in 2022.
JPM upgraded Barclays (LON:BARC) to ‘overweight’ from ‘neutral’ and lifted the price target to 220p from 180p, saying it was its new UK banks "top pick".
It downgraded Lloyds (LON:LLOY) to ‘neutral’ from ‘overweight’ and cut Close Brothers to ‘underweight’ from ‘neutral’, reducing the price target to 1,120p from 1,240p.
It also cut Societe Generale (EPA:SOGN) to ‘neutral’ from ‘overweight’ and Bankinter to ‘underweight’ from ‘neutral’.
