Barclays PLC (LSE:BARC) and Deutsche Bank are best placed to benefit from the escalating Middle East conflict, according to JP Morgan, which said higher market volatility was likely to boost trading revenues at globally focused investment banks.
The US bank's analysts said the direct earnings impact of the conflict on global banks was limited, as the Middle East, while a growing region for most large lenders, currently contributes relatively little to overall group profits.
Because most global banks operate wholesale rather than retail businesses in the region, JP Morgan said the spike in volatility was more likely to prove a tailwind than a headwind for trading revenues.
The bank said it preferred European investment banks over their US peers on valuation grounds, with Barclays and Deutsche Bank trading at price-to-earnings multiples of 7.1 times and 7.6 times 2027 earnings, respectively, compared with 14.9 times for Goldman Sachs and 14.4 times for Morgan Stanley.
JP Morgan's preferred ranking among global investment banks runs: Barclays, Deutsche Bank, Standard Chartered, Société Générale, UBS, BNP Paribas, HSBC, Morgan Stanley and Goldman Sachs.
The analysts added that Barclays, Deutsche, HSBC and Standard Chartered appeared to have been oversold in recent market turbulence.