European Banks Await Thursday's ECB Meeting at Two-Year Low

(Bloomberg) -- The main message investors in European lenders want to hear from the European Central Bank isn’t likely to be delivered before next year.

At the policy briefing Thursday, ECB President Mario Draghi may retain September’s confidence about “relatively vigorous” inflationary pressures, but is likely to reiterate guidance for maintaining interest rates at historically low levels at least through next summer.

The “meeting should be just a formality,” said Diego Fernandez, chief investment officer at A&G Banca Privada in Madrid. “Draghi will probably repeat his messages on the bond-buying program and on rates and insist on the need for more fiscal steps. There is little room for surprises.”

European banks’ shares have fallen this year amid political turmoil, scandals and some lender-specific issues that have, all together, resulted in banks being the second-worst-performing group among the 19 sectors in the Stoxx 600 Europe Index. The slow exit from quantitative easing and low interest rates have also put pressure on banks’ margins.

Investors may still want to listen carefully to any nuances in Draghi’s comments, given the equity market rout in October and data this week that showed euro-area economic momentum is slowing to the weakest in more than two years. A further pushback on the timing of higher rates is the last thing bank stocks need right now.

--With assistance from Stephen Kirkland and Jana Randow.

To contact the reporters on this story: Macarena Munoz in Madrid at mmunoz39@bloomberg.net;Jan-Patrick Barnert in Frankfurt at jbarnert3@bloomberg.net

To contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Monica Houston-Waesch, Jon Menon

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