PARIS May 3 Shares in Italian and Portuguese banks could give their stock markets a lift in the coming weeks, with top analysts forecasting first-quarter earnings will beat consensus estimates.
Thomson Reuters StarMine's "SmartEstimates", which favours recent predictions and those of top-rated analysts, predicts Italy's Banco Popolare will beat consensus estimates by 2.5 percent, Portugal's Banco Espirito Santo by 9 percent and Banco Comercial Portugues by 1 percent.
StarMine also predicts that Italy's top lender, UniCredit is set to meet forecasts.
AXA IM fund manager Gilles Guibout said Italian banks could easily pull out of the bag a string of better-than-expected results because expectations are already extremely low.
"The positive surprise would be if, for example, the banks have managed to restructure more than people have been expecting... There's a general distrust from investors for Italian stocks, which is creating big opportunities," he said.
Of the 15 percent of Italian firms that have reported, 75 percent have missed expectations.
That has resulted in Italy lagging the broader market in recent weeks, with Milan's FTSE MIB index up 3.2 percent in 2013, half the STOXX Europe 600's gains.
However, with financials representing 34 percent of the MIB's weighting, compared with 18 percent for Germany's DAX and 15 percent for France's CAC 40 - Milan's benchmark index could outpace peers if banks reassure.
Financials make up 21 percent of Portugal's PSI 20.
"With banks representing such a big part of the MIB, this could help the index revive its catch-up rally, following years of underperformance," said Riccardo Designori, analyst at Brown Editore, in Milan.
Banks have been the bright spot in the European earnings season so far. Half way through, two-thirds of financials have beaten or met profit forecasts, compared with 50 percent for all companies reporting, StarMine data shows.
Banks, laggards during the crisis, have been cutting costs and deleveraging to shore up balance sheets and meet regulatory requirements and this has been reflected in estimates.
European banks' earnings momentum - analysts' upgrades minus downgrades as a percentage of total estimates - has shown a steady improvement since late 2011, from -22 percent to -7.4 percent, according to Thomson Reuters Datastream.
(Editing by Nigel Stephenson)