“I certainly wouldn’t invest in European banks right now.” Those are the comments from an investment adviser even though lenders on the continent posted strong third-quarter results this week. Beat Wittmann, president of Porta Advisors, told CNBC that lenders are in a tough trading environment as the region faces a recession over the next three to six months. Corporate clients at lenders are struggling as rising inflation eats into their profits. According to Wittmann, this could hurt the profitability of banks. “Investment banking, M&A, IPOs, much less funding – a fraction of last year,” he added. Wittmann said even private clients in wealth management divisions – often a very lucrative part of a bank – are “reducing risk” to their portfolios leading to small fees than for lenders. Earlier in the week, UBS said it made $1.7 billion for the quarter. Despite the results, the equities team at Barclays Research maintains a ‘sell’ rating on the bank’s stock. “In wealth management, there are still outflows and some exchange rates, and AuM [assets under management] ended lower than anticipated despite higher net new money,” they said in a note to their clients. Both banks beat analyst expectations for the quarter. However, Wittmann did not alone in warning equity investors, Luke Hickmore, chief investment officer at Abrdn, told CNBC that while banks appear to be well prepared for a recession, it could be the season. Spring Barclays says it has set aside £381m on potentially damaged loans, up more than 200% from last year.We need to see them get through this period.We need to see their model indeed. exactly,” Hickmore said. Net profit margin – the difference between the amount a bank earns from interest on loans and paying on deposits – has increased for many lenders in Europe thanks to central banks raising interest rates. James von Moltke, Deutsche Bank’s chief financial officer, told CNBC’s Joumanna Bercetche: “We’re seeing the benefit of interest coming from our corporate and private banking. Deutsche Bank’s net profit margin increased to 1.5% in the quarter, up from 1.4% in the previous quarter and from 1.2% in the previous year. But this source of income for banks is unlikely to last long as European capitals debate the imposition of a “wind tax” on banks’ profits. Spain has imposed temporary levies on banks and large energy companies for two years and is now proposing an extension of these taxes. ge Hickmore added, more and more regulators, central bankers and politicians are starting to focus on those lucrative numbers and think ‘this is a revenue stream. Christian Sewing, CEO of Deutsche Bank, said in a statement that Germany’s largest lender was “on track” to meet its 2022 targets but only hoped for a return on capital. tangible owners above 10% by 2025. ROTEs below 10% pose “another problem” according to Hickmore, as rising rates mean investors have other investment options, like corporate debt , bring better profit. “The whole push towards better returns is just happening. We’re not there yet,” he added. Hickmore says that senior debt from European banks is now more attractive because they are not exposed to many of the risks that banks face. “You are taking less risk with earnings, less risk with the future and [loan loss] provision than equity investors. “