Investors cautious on European banks
NEW YORK: European banks have been hit hard by selling over the past two months, and investors are likely to remain cautious about piling into that area soon.
The euro zone's debt crisis continues to unfold, and the effect on European banks, which are seen having the biggest exposure to the debt problems, is largely uncertain, analysts said.
On Tuesday, Greece promised further cuts to its bloated public sector before a second conference call with its international lenders, whom Athens must persuade to extend more loans to avoid bankruptcy next month.
However, non-European banks, which also have suffered some big declines, may offer attractive buys for investors right now.
Shares of Deutsche Bank, down 0.1 percent at $33.20 for the day, have lost 40 percent since July 22, roughly when the US market's recent slide began.
Likewise, shares of Barclays Plc, down 0.1 percent at $9.66 for the day, are off 38.1 percent since July 22.
Shares of the Royal Bank of Canada, up 1 percent at $47.49 for the day, are down 15.5 percent since July 22. Shares of Banco Bradesco S.A., down 0.4 percent at $16.49 for the day, are down 14.2 percent since July 22.
"It's too soon to judge the investment merits of European banks, but it's reasonable to think European governments will not permit a financial collapse. Adverse effects on non-European banks should be relatively muted, so I'm more comfortable investing in non-European banks, notably US" ones, said Charles Lieberman, chief investment officer of Advisers Capital Management, LLC in Hasbrouck Heights, New Jersey.
While bank ADRs were mixed, the overall ADR market was modestly higher.
The BNY Mellon index of leading American Depositary Receipts rose 0.2 percent, while the Standard & Poor's 500 index also gained 0.2 percent.
The BNY Mellon index of leading European ADRs added 0.6 percent, while the BNY Mellon index of leading Asian ADRs slipped 0.3 percent.
The BNY Mellon index of leading Latin American ADRs dropped 0.9 percent.
Copyright Reuters, 2011
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