Citigroup, SocGen say sell stocks of European banks

Citigroup cut its recommendation on the industry to “underweight,” and reiterated “sell” ratings on Deutsche Bank AG and Royal Bank of Scotland Group Plc. Societe Generale said Deutsche Bank, Credit Suisse Group and UBS AG shares will decline from current levels.

“Our immediate concern is insufficient capital,” Societe Generale analysts wrote in a report to investors Friday. “The greater risk is for capital-markets banks in 2008, as maintaining absolute dividend levels despite falling profits may prove difficult.”

A measure for banks in Europe’s Dow Jones Stoxx 600 Index has had the second-worst performance among 18 industries in the broader benchmark in the past year, retreating 20 percent, as losses from credit investments triggered writedowns by banks. Only travel and leisure shares fared worse.

Credit Suisse, Switzerland’s second-biggest bank, Unicredit SpA, Italy’s biggest bank by assets, and Societe Generale, France’s second-largest bank, were removed from Citigroup’s “buy focus” list.

Royal Bank, the UK’s second-biggest bank, and Natixis, France’s fourth-largest bank by market value, were added to the U.S. bank’s “avoid focus” list.

Societe Generale cut its price estimate for Deutsche Bank by 3.7 percent to 78 euros, and on UBS by 6 percent to 47 francs. The analysts’ price forecast on Credit Suisse’s stock fell by 8.8 percent to 62 francs. The Paris-based brokerage reiterated an “underweight” recommendation on Europe’s banking industry.

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