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Forget about weak European bank earnings — Citi says it’s time to dive in

It’s time to dive into the underperforming European banking sector, Citi says.

A dramatic slump in first-quarter profits. A sharp underperformance in the stock markets. And an indisputable difficult business environment.

No, 2016 hasn’t been great for the European banking sector, but it’s time to perk up on the unloved industry and load up on shares while they are still a bargain, analysts at Citigroup say.

In a note dated Thursday, the analysts argued that the losses over the recent year — the Stoxx Europe 600 banks index FX7, -1.89% is down 29% over the past 12 months — make it a solid entry point into the sector.

“The recent derating provides a good cushion for disappointment at a time when various macro drivers should provide a more positive support for the sector, i.e., rising oil prices/CPI, narrowing credit spreads, stabilizing GDP,” the analysts wrote in the note.

“We see the case for moving more positive on European banks and move to overweight in our European sector strategy,” they added.

Of course, there have been many false...