Axiom AI reviews the crash of banking stocks
French boutique Axiom Alternative Investments focuses on the crash of banking stocks in its latest review.
The firm says such a negative peak in banking stocks valuations and indices has not been seen since the Eurozone crisis of 2011 when the drawdown reached -47%.
“But in 2011, the explanation was simple: Greece had announced the restructuring of its debt and the future of the Eurozone was everything but certain. A disorderly breakup of the single currency posed a huge risk to bank balance sheets.
“Hence, Mario Draghi’s famous phrase “Whatever it takes” was enough for banks to rally by +90% to the peak of last July,” Axiom AI explains.
For that new banking stocks’ fall, a number of economic and regulatory issues have hit the banking sector in addition to the three “usual suspects” which are often named in last market comments : “China, oil and “withdrawal of liquidity”, (whatever that means).”
Regarding fundamentals, Axiom AI estimates profitability has “not changed dramatically recently” and solvency is “not undermined by stocks of NPL.”
The asset manager says that the banking market has suffered from a bad decision on Novo Banco and a hasardous communication on the MDA.
“However, the trend is favorable with the transfer of resolution powers to the Single Resolution Board, a progressive clarification on MDA and a possible watering down of Basel 4,” the firm assesses.
Axiom AI points out the bottom has not been hit yet in terms of flows but “clearly it’s not far from where we are.”
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