Equity investors should look at euro-zone banks

Euro-zone bank shares are trading at a considerable discount. Obviously, the low interest rates and low level of interest rate margins on loans are weakening banks’ profitability. But one should not overlook that: Euro-zone banks are diversifying their business (into asset management, private banking and financial services); Borrower default rates remain very low thanks to the low level of interest rates, and banks’ non-performing loans are in decline; The euro yield curve is going to slowly steepen on the back of the improvement in cyclical prospects and the decline in risk aversion. Equity investors should be more interested in euro-zone banks.