Bank bear buys back into Europe’s financial sector

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DWS' European equity specialist Britta Weidenbach has cut her long-running underweight and bought back into central European banks, the fund manager has revealed.

The former Citywire A-rated manager told Citywire Global that financials as a whole had benefited from an improved risk/reward picture following the announcement of the ECB’s OMT programme in September.

Weidenbach has therefore added to her banking exposure in both the €273 million DWS Invest Top Euroland and the €913 million DWS Top Europe funds.

Financials as a whole now represents 25% of the DWS Top Euroland fund and 23% of the DWS Top Europe fund. Weidenbach said this represented a noteworthy change in stance for both funds.

‘I was always heavily underweight before and we used to have an overweight in insurance names, an overweight in real estate and a heavy underweight to banks,’ she said.

‘We were starting to see some improvement in areas such as fixed income, where bond yields slowed down, both in core and peripheral Europe at the long and the short end.’

Due to company regulations, Weidenbach said she was unable to name which banks she had added to her funds over the past few weeks.

However, looking at the most recent fund factsheets, Weidenbach holds French banking firm BNP Paribas, Italian bank Intesa Sanpaolo and German firm Allianz SE among the top 10 positions in the DWS Invest Top Euroland fund.

Meanwhile, Allianz SE is the fourth largest position in the DWS Top Europe fund.

European austerity

Another reason Weidenbach has turned more constructive on financials, she said, is because she believes the worst impacts of austerity measures on GDP growth in the eurozone have been absorbed in 2012.

‘Austerity and consolidation methods should have been at its highest in this past year and so we have seen the peak of negative impact on GDP growth through austerity measures,’ said Weidenbach.

‘We are not saying the end of the sovereign debt crisis but we are talking relative improvements and this should bode well for the European equity markets.’

This, Weidenbach said, is a pivotal point, as momentum is increasing and investor confidence in the region's banking system is on a firmer footing.

‘We are seeing positive upside momentum coming through. So we might see some positive earnings momentum in interesting areas and some Nordic banks, for example, might be able to have pay-out rates this year or increase their dividends, which has not been possible before.'

Weidenbach’s best performing of the two funds is the DWS Top Europe strategy, which has returned 29.95% over the past three years. This compares to its Citywire benchmark, the FTSE World Europe TR EUR, which rose 25.68% over the same period.