On the valuation the opinions are less sliced

Finally, the purge was short-term financial values. Four months after the corrections in the month of may, BNP Paribas and Société Générale have largely caught their during the spring, reaching a highest annual end of August.

And yet, Marc Renaud, Director General of JRC Actions, chose once again to go to reverse the trend. In the same way that he had not invested in oil securities last year, its décotées values, the CPF central value Fund, is today virtually none Bank, although the sector represents nearly a quarter of the index. "The banks today dealing at 2.25 times the book / value (the ratio of equity usually used for valuing banks) against 1.3 times from the technological bubble." In the meantime, I do not deny that they have significantly reduced their costs, outsourced the risks and diversified their sources of income. But their business has not changed as to justify such multiple expansion. And the market to persuade that banks have smoothed their cyclical nature, these ratios of top of cycle will be unsustainable sustainable.

Particular point that mortgage credit, who have doped their incomes are under pressure with rates rising, noting in passing that the defaults were increased in Britain. He stressed the risks on the derivatives and the activities of mergers & acquisitions, growth could strongly slow rollover in the financial markets. It further notes that the level of provisions in the balance sheets is historically low, which greatly increases the risk of effects of scissors on the margins for growth. "The multiplication of Takeovers in the sector, which are often launched at the top, strengthens me a little more in the idea that banks have reached a high of cycle." In portfolios, I therefore prefer to invest on insurance, which have more economies of scale and to achieve rationalization efforts.

In the financial community, this position against the current is shared reactions. In the financial sector specialists, deep disagreement is on the arbitration between Bank and insurance. If they also leverage conducted including restructuring by AXA and Allianz, all nevertheless emphasize the lesser visibility of insurance. 'Signs of top of cycle are accumulate,' admits Geoffroy Goenen, Manager of Dexia Equities FCP L Europe Finance. "Among other things, the cost of credit is not in connection with its historic standard." But in this case, it is more relevant to focus on the banks. In the phases of flipping, the profitability of insurance tends to degrade heavily under pressure yields erosion, the decline in collections and the intensification of competition. Some exceptions as is the case of April (the network of independent distributor) or to Admiral (the British car insurance company) which emit margins higher than the majority of banks. But, overall, the margins of the banks are more regular cycle. They are indeed high risk-taking, which enabled them to maintain their growth in reinvesting them on segments with strong margins, particularly in introducing in Eastern Europe.

On the valuation, the opinions are less sliced. The majority argues that the "universal" banks (which bring together activities of bank details, Bank business and asset management) are not be overstated. "In the long term, they are regular performance on the stock market, which merely reflects the constant improvement of their results." Today, they deserve more haircut. Longer term, I do not think that they are sitting on a ticking time bomb. "Through their efforts of diversification and better control of the risks, they are to hard to a margin of manoeuvre which would allow them ample to defuse" judge Christophe de Failly, Manager in FCP SGAM Fund euro Financial.

Enthusiasm for the Italy

Figures in support, Catherine Guinefort, head of the Parvest Europe Financials in BNP Paribas Asset Management Fund, estimated that the larger French and British institutions remain affordable. "They treat around 10 to 11 times earnings 2006. For slower economic growth, this ratio should not exceed more than 12 to 13 times, a level in line with the rest of the market. Moreover, their yields are usually around 4, largely above the borrowing of State.

Professionals are more reserved on the development of commercial banks or specialized institutions, such as Standard Chartered (the English House renamed in Asia) or Raiffaisen (the Austrian institution deemed on the Eastern Europe). Similarly, if they touched for Italy (the reconciliation of San Paolo and Intesa having opened the door to a major consolidation movement), are highly wary of English, Irish banks and to a lesser extent Spanish.

Portfolios, managers have also conducted important adjustments. "We partly sold regional banks and medium-sized institutions that are too speculative." "Banks are also poorly represented and we sous-pondérons the English banks heavily exposed to the consumer credit," says Catherine Guinefort.

All lip on the other hand the universal banks, citing (in addition to the French banks) Unicredito, KBC and HSBC among the most cited. "It must however monitor several parameters", warns Stéphane Cadieu, responsible of the management actions in Federal Finance. "For retail activities, it must monitor the costs." Interest margins on the other hand tend to decrease in Scandinavia, in Belgium but also in England, where Abbey increasing competitive pressure. On trading activities, corrections of May and June have also exposed the vulnerability of several institutions to declining volumes but also the strength of strategies of Société Générale and BNP Paribas. However this gap eventually be translated into valuations via a premium to the regularity.

However, in this trend, Dexia is the exception that proves the rule. "Retail banking has weighed on its rating to the detriment of the financing of the local communities where Dexia recorded strong growth, said Stéphane Cadieu." In the coming months, its new CEO will be probably either revitalizing retail banking or assigned to refocus on its main activity. An adjustment in the long term is therefore not excluded.