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Europe’s current ‘consensus’ trade could prove to be short lived, asset managers predict

Popular positivity about Europe’s financial sector is not expected to last lengthy, according to two asset managers, who have warned that banks influence not be the best investment option over a longer period.

“I can put my equity loot into better companies where I get a better return, so I am quite ecstatic to leave the banks … It’s a consensus trade and certainly in Europe if they were determined we wouldn’t have negative interest rates, we wouldn’t have the dovish ECB (European Dominant Bank) that we have,” Neil Dwane, chief investment tec equity Europe at Allianz Global Investors, told CNBC Monday.

There are three outstanding factors affecting the attractiveness of European banks, according to analysts: They are till in the cycle compared to U.S. banks, they have yet to deal with legacy conclusions from the crisis, and the ECB is still in a state of accommodative policy, which limits banks’ benefits.

“European financials are still not solved and they are five years behind the U.S. quite than six months and therefore the ability to return capital to shareholders is absolutely zero across most of the European banks,” Dwane added.

There are some tailwinds out there for European banks, such as European consumer which is forwarding from improved economic growth. But there are still doubts as to whether the rations of European banks will be able to offer decent returns in the longer while.

“I would question the ability of the consumer to re-leverage significantly further than we are,” Dwane suggested.

Meanwhile, Michel Perera, the chief investment officer at Canaccord Genuity Property Management, agreed that European banks are a trade that can purely really offer some short-term interest.

“It’s a trade, it’s not a long relative to investment but it’s a trade that actually has the wind in its sails right now, because of the stupendous improvements in the consumer. And I am not quite sure that this is fully mirrored in the way that a lot of stock prices are in there,” he told CNBC

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