Banks Europe (BNK) : Is this rebound credible?

Lyxor ETF Europe 600 Bank - BNK - 08/08/2018

Short Term strategy: Neutral (50%) / Trend +
Long Term strategy: Negative (45%) / Trend =

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Characteristics of the ETF

The Lyxor BNK ETF (Banks Europe) created in 08/2006 in Euro on Euronext and seeks to replicate the STOXX600 Bank Europe Index which is composed of the main European banking stocks. About half of the capitalization quotes in Euro, the other half is made up of English, Swiss and Nordic banks.

The costs of this ETF are 0.3% and the AUM approximately 677M €. Replication is indirect (via a swap) and there is a dividend capitalization policy.

Alternative ETFs: CB5 (Amundi in Euro), EXV1 (iShares in Euro).

Index & components

The interest of the BNK tracker lies in the fact that it groups together the 48 largest banks in the main European economies, with a great geographical diversity and a good North / South mix (29% UK, 15% Spain , 11% France, 10% Switzerland, 9% Italy), while relying on the strongest and most capitalized securities BNK brings together banks specialized in the retail (Lloyds or Santander for example) but also so-called universal banks like the French banks (BNP, SG and CA), which rely on both an investment bank and a retail model, the activities of the big banks are well represented, and the banks are currently in "transition" mode as the 2008 crisis has left its mark on a number of fronts: following central bank actions and QE programs, banks saw their margins erode because of negative rates, while they could no longer place their deposits at the ECB and are now experiencing a very flat yield curve with long rates remaining at very low levels.

On the other hand, the increased regulatory requirements have forced banks to significantly increase their own funds, which amounts to reducing the leverage and therefore the risks associated with their operations, but mechanically leads to lower ROCEs. In addition, the banking model is increasingly challenged by more innovative players, the "fintechs" who redefine the customer relationship and the notion of service in the financial world through offers with high technological content, while new approaches disruptive devices such as the blockchain that secures transactions outside any "third party" could in the long run threaten the role of banks as intermediaries in the economies of developed countries.

However, bank valuations already incorporate many of these risks, while a number of them have already embarked on ambitious transformation / digitization plans and should take advantage of ongoing changes. In the same way that the distribution was transformed 20 years ago by the arrival of the actors of the web, without disappearing so far, it is likely that banks will follow the same path of adaptation and modernization without prohibiting acquire knowledge by buying fintechs.

Latest developments

BNK posted a negative performance of + 12.1% in 2017, higher than the STOXX600NR (+ 10.6%) but is down -7.3% since the beginning of the year, because the sector was put under pressure both by the ECB which  seems in no hurry to normalize its monetary policy, which negatively affects the yield curve on which bank margins depend, and also the European political cycle is again a risk factor with the Italian populist government, the fragile German and Spanish coalitions and especially the Brexit which now seems to move towards a "no deal" which weighs on the Pound and makes English banks unattractive.

However, the quarterly results are rather reassuring for the moment while valuations are historically low, which argues for a rebound of the sector.

Weekly data

The weekly chart shows a medium-term trend that turned negative and evolving within a bearish channel. Prices are currently returning to the top of this channel without a trend reversal occurring. The EMA100 stands as a major resistance, and as long as it is not crossed the trend will continue to be bearish. The reversal of the MACD, however, is a positive factor to monitor for a possible attack of the EMA100.

Daily data

On the daily chart, we can observe the short-term rebound in formation which allowed an upward crossing of the EMAs 13 and 26 as well as the reversal of the main oscillators. Prices have just stumbled on the EMA100 which is as well as the EMA200 very close, and represent the main resistance. Crossing the € 21.5 zone is therefore key to a continuation of this rebound in the medium term.

ETF Objective

BNK is a UCITS ETF, listed in EUR, which seeks to replicate the STOXX Europe 600 Banks Net Return EUR (48 european banks)


Inception date 25/08/2006
Expense ratio 0,30%
Issuer Lyxor
Benchmark Stoxx600 Banqks
Ticker BNK
ISIN FR0010345371
EU-SD Status No
Exchange Euronext Paris
Assets Under Management 677 M€
Dividend Capitalization
PEA (France) Yes
SRD (France) Yes
Currency risk Yes
Number of Holdings 48
Risk 4/5

Country Breakdown

United Kingdom 29%
Spain 15%
France 12%
Switzerland 10%
Italy 9%
Sweden 8%
Netherlands 6%
Germany 3%
Others 8%

Sector Breakdown

Financials 100%

Top Ten Holdings

HSBC Holdings 16%
Banco Santander 8%
BNP Paribas 6%
ING Group 5%
UBS Group 5%
Lloyds Banking Group 5%
Intesa San Paolo 4%
Barclays 3%
Credit Suisse 3%