Citigroup Downgrades European Banks, Sees STOXX 600 Little Changed By Year-End

• Citigroup downgraded Europe's banking sector, warning the rapid pace of interest rate hikes will further weigh on economic activity and lenders' profits, and said it expects the region-wide equities index to remain near current levels by the end of the year.
• The Wall Street brokerage cut its rating on European banks to "neutral" from overweight" in a note dated Wednesday, saying the likely continued monetary policy tightening adds to worries stemming from the turmoil in the global banking sector.
• "The European banking sector's fundamentals look healthy. But the ongoing confidence crisis could limit banks' risk appetite and reduce the flow of credit," equity strategists led by Beata M Manthey said in the note.
• They, instead, prefer technology stocks and upgraded the sector to "overweight", citing healthy cash balances and several growth drivers.
• Citigroup trimmed its 2023 year-end forecast for the pan-European STOXX 600 index by more than 5% to 445 points, which represents a 0.4% downside from current levels. Citi also cut its forecast for UK's FTSE 100 index by 5%, now expecting the blue-chip index to end the year at 7,600 points, less than 1% higher than current levels.

(Source: Reuters)