JP Morgan 'overweight' European Banks ahead of lifting of dividend restrictions

Analysts at JP Morgan reconfirmed their "positive" view on European banks' shares in anticipation that the European Central Bank was set to give the 'thumbs up' to lifting restrictions dividend payments.

"We believe clarity on NPV of future cash dividends is a key for investors in this largely ex-growth mature sector," they said.

Their estimates called for an "attractive" average dividend yield of 5.0% for the sector in 2022 and a total yield of 6.3% when share buybacks are included.

Also on their estimates, the European Banks sector was trading on a 2023 price-to-earnings multiple of 8.3 times and 0.8 times tangible book value despite 30% relative outperformance since October 2020.

The ECB's next supervisory board meeting was scheduled for 23 July and its stress test results for the sector for 30 July.

Nordea, Intesa SanPaolo and BBVA were the "most attractive" shares in the space based on their cost of equity analysis based on the modified dividend discount model.

JP Morgan's recommendation for the sector remained 'overweight'.