European banks have never traded this cheap relative to U.S. banks, according to an equity research team at Citi, who have turned bullish on the beaten-down sector.
On Sept. 19, Citi declared that European banks were "the world's biggest contrarian trade" but remained neutral with its outlook. However, on Thursday a new note from the bank said it was now "overweight" on the sector, suggesting that investor positioning is very light.
"Euro area, Europe ex-U.K. and U.K. banks are among the worst five performing region/sector combinations in the last 10 years out of 285 we track," the team, led by Jonathan Stubbs, said in the note. "European banks have been the lightning rod for all post-GFC (global financial crisis) macro risk," it added.