Don’t freak out about the current selloff in banking stocks — just pick your region carefully if diving into the financial sector.

That’s the message from Citigroup, which recommended ditching U.S. banks and instead looking across the Atlantic to European lenders that have a lot of things going for them at the moment.

“Over the last 12 months, global equities and global banks have rallied and are up 15% and 30% respectively. EU banks (+16%) have been laggards though, underperforming U.S. (+50%) and Japan (+26%) peers and the broader markets due to fears over economic recovery, political risks and weak profitability,” the strategists, led by Citi’s European banks research head Ronit Ghose, said in the Tuesday report.

U.S. banks have significantly outperformed European lenders over the past 12 months. FactSet

“We see many of these concerns now subsiding with EU bank [earnings per share] revisions turning stable to positive (after multi-year declines) and political risks slowly receding,” they added.

Among waning political threats, they pointed to the Dutch election last week in which voters rebuffed far-right, anti-EU candidate Geert Wilders, referred to as the “Dutch Trump.” The election was seen as a litmus test of the rising populist movements in Europe, fueling speculation anti-establishment candidate Marine Le pen will get a similar treatment in the French vote in April.

“We see significant connection between French banks performance vs. the poll results on Le Pen lead,” the Citi analysts said. “Most recently, the decline in the distance between Le Pen and the second candidate has resulted in bank stocks reacting positively.”

Citi

Shares of French banks, such as Credit Agricole ACA, -3.15% , Societe Generale GLE, -3.05% and BNP Paribas BNP, -2.34% , have soared between 7% and 12% in March alone.

Overall, even if European banks are underperforming their global peers, they are ahead of the broader European stock market. The Stoxx Europe 600 index SXXP, -0.66% is up 10% over the past 12 months, while the banking sub-index SX7P, -2.63% has risen 15%.

In comparison in the U.S., the S&P 500 index SPX, -1.11% has jumped 14% over the past year, while the benchmark’s banks KBE, -0.92% have moved a whopping 35% higher.

“EU bank valuations [are] not overly stretched — despite the recent stock rally, EU Banks still stand out as a value play among developed market banks,” the Citi analysts said.

Earnings strength

Improving profits are another key reason for Citi’s appraisal of Europe over the U.S.

European financials have been hit hard twice over the last decade, first by the global financial crisis and then by fears that the region’s sovereign debt crisis would break up the entire eurozone. That left earnings forecasts for the region’s lenders down 76% over the last 10 years, compared with a 32% drop for their U.S. counterparts.

But that misery is showing signs of coming to an end, according to Citi. On an underlying basis, the strategists expects European banks to see profits jump by 16% this year and by 10% to 11% over the next couple of years.

“Stable costs, better revenues is expected to boost profit growth on an underlying basis, partly offset by a small uptick in provisions,” they said.

“Fading one-offs, especially fines and litigation charges, should result in a significant uplift in reported profit,” they added.

Read:How Brexit is hurting U.K.-focused stocks — in one chart