The 2016 All-Europe Research Team: Banks, No. 1: Michael Helsby, Alastair Ryan & team

Under the guidance of Alastair Ryan and Michael Helsby, Bank of America Merrill Lynch’s European banks squad defends its crown

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< The 2016 All-Europe Research Team

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Michael Helsby, Alastair Ryan
& team
Bank of America
Merrill Lynch
First-Place Appearances: 12

Total Appearances: 32

Team Debut: 1990

Sponsored

Under the guidance of Alastair Ryan and Michael Helsby, Bank of America Merrill Lynch’s European banks squad defends its crown, extending the firm’s run at the top of this roster to a third year. The London-based group of eight analysts covers 11 names in this space and has a positive outlook for the sector, overall. “‘Banks are leveraged macro plays’ was a key rule-of-thumb for many years,” notes Ryan, “but it has been rather lost in this European recovery, in large measure because regulatory changes have been so frequent and cumulatively very dilutive for shareholders.” That level of oversight intervention is poised to change, however. “Basel III is over, and there is no Basel IV,” says Helsby, 43. “We see what changes there are left as being relatively modest in scale and distant in time. As a result, those banks that have removed legacy assets and businesses should be well placed to focus on growing earnings and paying higher dividends.” Lenders that have not done so, including institutions in Italy and Spain, are raising some concerns for the team. “We believe the European Central Bank will be putting increased pressure on resolving those issues, which would mean another year or more of cleanups ahead,” he advises. Overall, the researchers believe, the end of the capital adequacy debate will create space for market participants to evaluate companies by additional financial metrics. A bank they recommend favoring for its balance of modest volume growth and strong dividends is France’s BNP Paribas. “We see a 2016 price-to-earnings ratio of just 7.2 times — one of the lowest in the market — as depressed, while the prospective dividend yield of over 6 percent is excessive in a lower-for-longer environment,” explains Ryan, 44. Their target of €68.70 indicates a 51.4 percent premium to the stock’s price in mid-January.

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