Look to Spain for European Banking Opportunities

PERSPECTIVES: Consolidation in the banking industry in Spain has reduced risk and created some fantastic investment opportunities

T. Rowe Price 28 January, 2014 | 10:04AM
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This article is part of Morningstar's "Perspectives" series, written by third-party contributors. Here T. Rowe Price European Equity fund manager, Dean Tenerelli explains why investors should reconsider financial stocks from eurozone nations.

I believe the current financial crisis is bringing opportunities—similar to the early 1990s Nordic banking crisis—and could trigger industry consolidation in a number of markets, which eventually should prove beneficial for banks’ shareholders. 

Over the last year certain southern European banking names have become considerably more interesting. Alongside attractive valuations and the scope for a recovery over the medium term, there is the potentially favourable impact of industry consolidation in some markets. Generally, the degree of concentration in a country’s banking sector has a major influence on banks’ profitability and balance sheet strength. In more concentrated markets, it is evident that the large players benefit from economies of scale and cost efficiency, as they are able to spread their fixed-cost bases over a greater number of products and customers. Also, in oligopolistic environments, we observe that management teams are more focused on returns and profitability, rather than continually chasing after market share.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Bankia SA  
Bankinter SA4.51 EUR0.00
T. Rowe Price Eurp Eq A EUR18.03 EUR0.37Rating

About Author

T. Rowe Price  T. Rowe Price is a global investment management firm dedicated to helping clients achieve long term success.

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