Royal Bank of Scotland was the champion European bank share in the first quarter, according to research by British brokers Salomon Smith Barney. The bank, which analysts say benefited from solid domestic business and merger rumours, outperformed the Dow Jones Stoxx European banks index by 36.2 per cent in the first three months of 1999. Overall, French banks outperformed the index by the biggest amount, gaining 12.1 per cent mostly on the back of the three-way merger contest taking place there and on better than expected 1998 results.
Of the three French banks involved in the tussle, Paribas outperformed by 28.3 per cent, Societe Generale by 18.6 per cent and BNP by 5.6 per cent.
In terms of bank sub-sectors, Salomon noted that investors had shown an increased appetite for international and investment banks, which tend to have a higher risk profile, to the detriment of "safer" retailers and bancassurers. Investment banks and international banks outperformed the bank sector index by 8.3 and 9.4 per cent respectively, while universally banks gained 4.4 per cent.
The bancassurers lost 9.1 per cent relatively and the retailers 3.1 per cent. Other states where the banking sectors also showed a very positive performance were Britain, Austria and Switzerland, all outperforming in double figures compared to the overall European index.
The worst performer was Denmark, losing 20.2 per cent, followed by Finland, down 14 per cent and Germany losing 10.5 per cent. Salomon said the poor performance of German banks was partly explained by provisioning concerns raised by the 1998 results, while the Danish performance reflected lacklustre 1998 results and a flat revenue outlook for 1999.
