He said many banks have already doubled in their price/book terms but he said there was scope for them to double again.
Mitchell said a couple of years ago his team were buying strong banking franchises like Lloyds, BNP Paribas and Intesa Sanpaolo for "around 0.5x book".
He thinks that the changing regulatory landscape witnessed over the last couple of years, with higher levels of capital adequacy and the difficult headwind of such negative news flow and its 'banker bashing', against a weaker economic backdrop had many across the industry believing such banks would just about break even.
"The assumption was that it would be very difficult for them to generate more than their cost of capital, but we think that is just nonsense. We think that in one or two years' time the strongest retail banks will be making similar returns on capital to those they made before the crisis."
Cheap deposits, little competition
Mitchell says the strong retail brands with access to cheap deposits will be the clear winners.
On BNP Paribas, he said: "They have a branch in every little village in France where there's no competition. You can basically pay nothing and then lend out to your local [community] at very high rates – that makes a fantastic business."
He admitted to talking against consensus from other banking analysts when he said 15-20 per cent earnings were on the horizon.
"Even with the extra capital burden, that's been more than offset by higher lending rates. The other big surprise has been over the cost of deposit funding, which has collapsed. If you deposited money with Lloyds three years ago, when they were scrambling to replace their wholesale money with money from people like you and I – safe, stable money – you would have got 4 or 5 per cent. Now you'll get half a per cent, because there's no need for it. The restructuring of the system, the wholesale funding, has now been replaced already. It's really interesting."
The London-based boutique, which specialises in European equities and currently runs $1.8bn, has been making the case recently for companies from across the continent that derive their growth from domestic consumption, rather than relying on a (slowing) emerging market demand.
