Via Bloomberg
The FTSE 350 banks index has a slight lead over its euro-area controlled neighbours so far this month. The relief of Brexit being behind for the UK has been and should remain a general tail wind for the UK. Also British lenders have become relatively cheaper to the Eurp Stoxx index - see chart below:
However, over the last few months euro-area lender's 12 month forward EPS estimates have risen a bit more than U.K. estimates.
The key challenges for European banks are that the COVID-19 impact in Europe could weigh on loan-loss provisions. Also,the return of dividends has restrictions. The U.K banks share prices have not enjoyed the full freedom post Brexit as prices have been held back on the overall risk tone, but also as the UK struggles with the London variant of COVID-19. So, should COVID-19 be finally controlled in the UK and domestic banks continue with plans to shut around one third of their retail branches then UK banks could still offer good value for medium to longer term plays over European banks.
