European banks are ahead of the millennial zeitgeist
Europe’s banking sector’s investment in fintech and ESG merits more confidence than their exposure to negative European Central Bank rates might suggest. On these counts, the US banks may be lagging.
For investors, Europe’s banks are at their lowest ebb. In the run-up to September’s European Central Bank (ECB) meeting, expectations of a new round of monetary-policy easing pushed their shares to a point not seen since 2009.
As ever-growing capital demands exacerbate the cancer of negative rates – with the sector also suffering from a series of money-laundering scandals – the sick patient of global banking now seems at death’s door.
American peers can only gloat, celebrating their far better stock valuations, and the ever-receding chances of any European bank putting up a proper challenge to their dominance of the global investment banking scene.
The most common reaction by European bankers is to blame their regulators for putting them on an uneven playing field – and their parochial politicians for failing to create a properly unified continental-scale banking market. Some of this is fair.
But European banks are doing well, and demonstrating better prospects than American banks, on what even American banks increasingly see as the most important bases for success in the coming era: digitalization and the prioritization of stakeholders over shareholders alone.