European bank shares have now regained almost all their precipitous losses of early 2020. They’ve been roughly flat over the past six months. But many equity analysts are still arguing for further gains. Does this mean the sector, still trading at a discount to book value of about 20% in late-September, is in a better position than it was before the pandemic?
Perhaps not. Much of the optimism, after all, is to do with dividend yields and share buybacks, after the European Central Bank confirmed in July that it was finally lifting its early-2020 dividend ban.
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