Investor sentiment towards European banks could be about to change, an investment officer told CNBC on Wednesday.
The sector was dumped by many market players in the fallout of the global financial crisis in 2008 and has yet to fully recover to pre-crisis levels. Litigation charges, overbanking and a high level of bad loans are among the biggest problems for Europe's banks — at a time when interest rates have remained low, thus limiting the room to improve their margins.
However, the European Central Bank (ECB) is set to start tightening its monetary policy and increase rates next year amid improved economic fundamentals in the euro zone.
According to one investment officer, even if the ECB only lifts rates marginally, this would improve the profits of European banks, increasing the returns that investors make by holding stocks.
"It is one of our favorite sectors, believe it or not, because we think there's change coming," Christian Nolting, chief investment officer at Deutsche Bank Wealth Management, told CNBC's "Squawk Box Europe."
"The ECB has said that, more or less, it won't do anything or much before the summer of next year. But I think there's a lot of discounting and if at one point in time, even if it's next year, the negative deposit rates are lifted, say at least a little bit, not to positive but at least a little bit, it's a signal for investors probably to put more money in."