The Zhitong Finance App learned that the strong performance of European banks and pharmaceutical giants helped push European companies' profits unexpectedly in the first quarter to exceed market expectations. Analysts believe that this also indicates that future performance guidelines may be further raised. According to Bloomberg Intelligence data, finance and healthcare are the only segments in the MSCI European Index with profitable growth, which is better than the decline in market expectations. Overall, the profit decline of 6% in the MSCI Europe Index (almost all constituent stocks reported results) was better than the general forecast of 11%.

Bloomberg Intelligence analysts Michael Shah and John Murphy said that AstraZeneca (AZN.US), Novartis Pharmaceuticals (NVS.US), GlaxoSmithKline (GSK.US), and Novartis (NVO.US) all performed better than expected in the first quarter, thanks to higher-than-expected sales and lower operating costs, while providing “low threshold” full-year guidance to allow for potential increases in the future.

Shah and Murphy expect that if Novo Nordisk, Europe's highest-capitalized listed company, makes more positive progress in GLP-1 production capacity, the company may further raise its guidelines. Additionally, Citibank analyst Peter Verdot wrote in a report that once the US drug regulators meet in June, the opportunities brought by the RSV vaccine market will become more clear, and GlaxoSmithKline may also update its performance guidelines.

In the banking sector, Bloomberg Intelligence data shows that 71% of European banks exceeded market expectations in the first quarter's net interest income, while banking performance in Spain, Italy and the UK exceeded expectations, while Nordic peers fell short of expectations.

In the UK, Barclays Bank's (BCS.US) performance surpassed expectations, driven by an increase in net interest spreads, and peers NatWest Plc (NWG.US) and Lloyd's (LYG.US) showed similar resilience. In Germany, Commerzbank (CRZBY.US) raised its guidance, and Deutsche Bank (DB.US) also performed well. Fixed income increased 7% in the first quarter, exceeding analysts' expectations and ahead of most major US investment banks.

KBW analysts led by Andrew Stimpson wrote in a report: “Banks are slowly proving that the increase in profitability will largely continue.”

Also, about 85% of European bank loan loss provisions for the first quarter were lower than expected. The total reported provision was 9.5 billion euros (10.3 billion US dollars), lower than the forecast of 11.3 billion euros. This is because credit risk has not worsened as previously anticipated since the second half of last year.

Bloomberg Intelligence analyst Kaidi Meng said that in addition, better-than-expected loan revenue and lower-than-expected loan losses indicate that the industry's profit expectations are still conservative and may rise further in the future.

However, the banking sector's profit expectations will still need to face challenges in the year ahead. Bloomberg Intelligence's Laurent Douillet said that the annual loan loss provision is estimated at 48.3 billion euros (lower than 49.4 billion euros at the beginning of the year), which means that provisions will increase in the next few quarters, which may be a “source of bank profit surprises.”

In addition, as the Bank of England and the European Central Bank prepare for possible interest rate cuts, net interest income is also expected to slow in 2024. The market generally expects an increase of only 1% for the whole year. In contrast, the growth rate for the first quarter was 5%.