Having a heartbeat is not the same thing as being healthy. That’s the sentiment being expressed by many global observers when commenting the results from the European Central Bank’s long-waited stress test of the European banks. Fresh figures from ECB have shown last Sunday that the vast majority of eurozone’s commercial banks are strong enough to survive a crisis, but they failed to trigger a wave of optimism both among observers, and investors.
Though most of the European banking blue chips entered the week in the black, market analysts are recommending caution. This includes those listed on the Warsaw Stock Exchange’s WIG-Banki index, which has risen at a slower pace compared to other European banking indexes. One of the key issues for the sector remains high market valuations, resulting from from overly optimistic forecasts for the Polish banking sector which has now been lowered. With the recent interest rates cuts from Poland’s Monetary Council, the country’s banking sector is no longer expected to significantly improve upon its 2013 performance. This creates a highly competitive, low-margin environment for the banks in Poland.
