Credit Suisse prefers UK banks

9th Mar 2011 08:56

Credit Suisse has downgraded European banks to benchmark from a small overweight position in the second half of 2010, instead preferring UK lenders like HSBC and Barclays.It thinks Continental European banks could be hurt by an ECB policy "error" - a rate rise in April - and significant uncertainty over regulatory, legal and tax risk.In a note to clients Wednesday, the broker expressed a liking for "cheap indirect plays on Global Emerging Markets" like HSBC, and prefers domestic UK banks to Continental banks, which is where Barclays comes in.HSBC's exposure to US housing through Household, a 10% discount on 12-month forward P/E and 2011 estimated dividend yield of 3.6% make it one to have.The Swiss analysts have also picked what they think will be winners further afield."Into rising rates, we like banks with low leverage and low loan-to-deposit ratios: Vakifbank, KB Financial, Agricultural Bank of China, JP Morgan, and Bank of America," they wrote.