European investors are failing to appreciate the banking recovery

Cyclical opportunities

We are witnessing encouraging signs from a broad range of businesses in the more cyclical areas of the European economy, such as airline group IAG and Italian media company Mediaset.

UK housebuilders, such as Taylor Wimpey, are also continuing to enjoy buoyant demand and limited cost inflation. One area of particular interest to us continues to be the European banking sector. Our meetings with a number of banks across the region testified to a more positive outlook than is generally accepted by investors. We believe the market has failed to appreciate the benefits of stable financial margins, coupled with draconian cost cutting and easing regulatory pressures. Returns for the continent's strongest retail banking franchises, such as Lloyds in the UK and Italy's Int...