Revamped capital rules will be a key driver of bank share prices over the next three years, Exane BNP Paribas told investors on Monday.

With Basel IV (or as some like to call it, the extension of Basel III) expected to be finalised by the end of this year, the French equities broker sees limited prospects of improved revenue or earnings for lenders.

“Uncertainty related to these requirements has justified part of the premium in the cost of equity for the sector relative to the market," said Jag Yogarajah, a London-based vice president at Exane BNP Paribas.

Although there is no official Basel IV, regulators are poised to make sweeping alterations to the existing Basel III international accord over the next three years.

These include raising the risk-based capital ratio, revising risk weightings, and moving away from model-based assessments as part of a revamp of the capital requirements for operational, market and credit risk.

“We would start by saying that whilst there have been some comments regarding there being “no Basel IV”, this feels more like politics than anything to us,” added Exane BNP Paribas’ Amit Goel, joint author of the firm's latest note entitled 'The Regulatory Steamroller'.

“Even if it is just an extension to Basel 3, we analysed the recent proposals, and ultimately capital requirements are still going to increase.”

Exane’s note added that the recent proposals in aggregate may be excessive, and analysts at the firm see justifications for watering down in some areas.

Even so, there is no consensus on what the final requirements will be.

The house view at Exane is that Swedbank, DnB, Natixis, Intesa and KBC screen best on capital return.

Meanwhile Barclays, Credit Suisse, Unicredit, Deutsche Bank and Soc Gen are under the most capital pressure.

“These names are most dependent on the requirements being watered down, or delayed, and go-to capital targets being reduced,” Exane's note added.

“If this does not happen, even without dividend payments, they may not have sufficient earnings to absorb regulatory inflation.”