French bank stocks have been the picks of Europe over the past year, outperforming the sector .SX7P by around 30% after shedding risky assets and boosting their capital defenses.
Although any enthusiasm is tempered by concerns the French banks have yet to carve out a competitive niche that can withstand increased regulation and market jitters linked to higher interest rates.
'The Greek problem has been taken care of (and) exposure to Italian debt has been cut across the board,' said Frederic Rozier, a fund manager at Meeschaert Gestion in Paris.
'The French banks have realigned themselves… but with interest rates on the rise, a potential property correction ahead and mounting regulation, there is still a question mark over the business model to choose.'
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