2016 was never likely to be the year of fat profits, at least not for some of Europe’s largest banks in the middle of deep restructuring.
For many of these troubled banks, it’s been a rough start to the year. Shares have dropped on average by more than 20 percent since the start of the year in Europe’s banking sector, with a tough global economic environment weighing on investor sentiment and their appetite for doing business with banks.
The economic uncertainty has hit bank profits across the globe, but in Europe, three banks in particular have done even worse than the European average. Deutsche Bank, Credit Suisse and Italy’s Unicredit are all in the middle of overhauling their business models.
For these three banking giants, managing expectations will be the name of the game over the next few months. Better to surprise investors by beating their forecasts than to disappoint them with more bad news.
Results from the first quarter of this year highlight this battle of expectations. Of the three banks, Unicredit actually posted the biggest quarterly profit – yet its share price fell as investors had hoped for more.
Deutsche Bank and Credit Suisse, by contrast, surprised investors with some good news after months of warning that the times were tough. The two banks saw their share price rise accordingly.