Europe’s big banks surge ahead while Irish banks hold steady

Some of Europe’s largest banks have managed to break free from their sector’s dramatic share price spiral by wooing investors with expectation-beating profits and promises of returning cash to shareholders.

Irish banks remained subdued for the most part on Wednesday, but managed to hold steady rather than losing ground. Bank of Ireland was relatively the best performer, gaining 5 per cent to close at 16.6 cent. AIB was flat at €6.50, while Permanent TSB gained 1.4 per cent to finish at €2.12. All three had lost ground in the wake of last Friday's European Banking Authority stress tests, which were particularly negative for AIB and Bank of Ireland.

Dutch lender ING soared 8.2 per cent on Wednesday after quarterly results smashed expectations. The UK’s Standard Chartered rose 4.2 per cent after making good progress on costs and revenues.

HSBC and French lenders Crédit Agricole and Société Générale were rewarded with more modest share price rises for topping earnings expectations and posting stronger capital than analysts had pencilled in.

First boost

After a wide-ranging sell-off at the start of the week, the strong results gave shares in European banks their first boost since Friday night’s publication of the stress tests, which were aimed at reassuring investors that the sector was sound.

The Euro Stoxx banks index, which broadly reflects the European banking sector, advanced on Wednesday. That followed sharp falls on Monday and Tuesday, when it fell 2.8 per cent and 4.9 per cent, respectively.

Monte dei Paschi, the troubled Italian lender that finished last in the EU stress tests and collapsed 16.1 per cent on Tuesday despite a private-sector rescue plan, rebounded a touch on Wednesday.

European banks have become one of the biggest concerns among European investors and policymakers following June’s vote in Britain to leave the EU. The result sent shockwaves through European markets and exposed existing weaknesses in some euro zone banks, particularly in Italy, which has borne the brunt of the post-Brexit sell-off.

– Copyright The Financial Times Limited 2016