Equity valuations between Japanese and European banks will converge with quantitative easing (QE) programs and negative interest rate policies set to continue for the long term, according to a team at JPMorgan.
"QE reduces lending rates to negative and we are going to expect negative lending rates until 2021," Kian Abouhossein, head of European banks equity research at JPMorgan told CNBC Tuesday.
"So as long as that is the case, margins will not improve. Sixty percent of revenues is net interest income and as long as that's the case earnings will not improve. So return on equity is very low."
Yahoo Finance