Ready, Steady, Stress! Capital Structure Investing in a Changing Eurozone Banking Landscap
- We have a high conviction that over half of the 130 banks under review – including all large systemic national champions – will pass the ECB’s stress test.
- Nervousness about the asset quality review and stress test has not played a major role in the recent selloff of risk asset classes, rather it was driven by broader risk-off sentiment.
- Subordination premia remain historically high and valuations across the capital structure are heavily dislocated, offering exciting relative value and capital structure arbitrage opportunities.