The portfolio reached a new all-time high in U.S. dollar terms last week. The swift rebound from April’s turbulence highlights the resilience of European equities—particularly banks, which are delivering double-digit returns on tangible equity while still trading at deep discounts. With valuations attractive, earnings holding firm, and macro momentum increasingly favouring Europe, I believe the portfolio is well positioned to capture the opportunity set for the rest of 2025 and beyond.
I continue to overweight European banks in the portfolio. Many large European lenders still trade below book versus an average of 1.4× for U.S. peers, despite delivering comparable profitability. Crucially, these earnings are being returned to shareholders: European banks are set to distribute a record €123 billion in dividends and buy-backs this year. With EURUSD expected to rise toward 1.20 over the next 12 months on relative growth momentum, I also favour the sector’s limited USD exposure.
Importantly for banks, I expect the German 10-year Bund to rise gradually to 3.5% in 2026, driven by fiscal loosening and a normalising term premium. Aviva Investors even argues 4% is “entirely feasible”. A 100 bp parallel shift higher in the interest rate curve is worth c. +8% to European bank earnings.
In the portfolio, Nordea trades at 9× next year’s earnings, ING at 8×, Santander at 7×, and Barclays at just 6×. All are below the 10× multiple that a typical bank has historically commanded in normal conditions. Achieving such valuations is far from unrealistic: in the U.S., Bank of America trades at 10× and Wells Fargo at 11×; in Japan, Mitsubishi UFJ also trades at 10×; and in Canada and Australia, bank valuations are often even higher.
European banks remain undervalued because markets continue to price in structural profitability challenges, heavy regulation, and macroeconomic risks that their U.S. and Asian peers have largely avoided. However, with European interest rates no longer negative, capital returns accelerating, credit quality remaining strong, and powerful policy tailwinds expected to boost the region’s economy in 2026–27, I believe this valuation gap will gradually close. The portfolio is positioned to benefit from this convergence.
𝟮𝟬𝟮𝟱 𝗽𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲
@triangulacapital +16.1%
SWDA.L +1.0%
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Enel was sold, Banco Santander bought.
