1042 GMT - European banks' profitability will hold up better than feared thanks to the return of loan growth and a slightly upward sloping yield curve, which will be powerful counters to headwinds from falling interest rates, Keefe, Bruyette & Woods say in a research report. "2025 will therefore be a crucial year for the banks to prove the doubters wrong," they write. The market still has a high level of scepticism on the profitability of the continent's lenders--which have outperformed every other European sector over the past five years--as shown by the failure to rerate in price-to-earnings terms. KBW analysts advise investors to stick with rate-sensitive names--which were 2024's winners--as they will still generate high income levels given the hedging strategies they have in place. (elena.vardon@wsj.com)

(END) Dow Jones Newswires

January 06, 2025 05:42 ET (10:42 GMT)

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