Banks - Strategic updates the main catalyst for re-ratings

Davy Research
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On a year-to-date basis, Irish banks and CYBG continue to significantly underperform the SX7P index; in contrast, Lloyds Banking Group (LLOY) and RBS have modestly outperformed the index. The de-rating reflects a range of concerns stretching from Brexit to sustainable levels of returns in the context of the interest rate and competitive environment. While the probability of a ‘hard Brexit’ has receded, we believe that addressing concerns on sustainable returns is a more pertinent catalyst for potential re-ratings, with full-year results in late Q1 2020 the likely timeframe.