(Bloomberg) -- European banking stocks will be weighed down next year by concern over reduced profits from lending as central-bank rate hikes are unwound, according to analysts at Goldman Sachs Group Inc.

Worries about short-term “over earning” by lenders due to currently high interest rates have left the sector trading at trough valuations, analysts including Chris Hallam wrote in a note. Such concerns will “continue to weigh on sentiment over the coming 12 months,” they said.

The Stoxx 600 Banks Index trades at 6.4 times earnings forecast 12 months from now versus 12.6 times for the broader Stoxx 600 index, data compiled by Bloomberg show. That’s despite lenders outperforming this year, with the subindex rising about 16% versus the 9.1% gain of the broader gauge.

Lenders are “relatively inexpensive,” according to the Goldman analysts, with their share prices having failed to keep pace with the rates-driven boost to earnings.

Goldman downgraded France’s Societe Generale to sell and Ireland’s AIB Group Plc to neutral, while upgrading KBC Group NV to buy.

Earlier: ‘Inexpensive’ Banks Held Back by Earnings Durability Concern: GS

--With assistance from Macarena Muñoz.

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