It is only a question of time and the markets are waiting: there will be more consolidation operations in the European banking sector in the next few years, some of them cross-border.
The TLTROs, or ECB credit lines to European banks, have for years regulated bank liquidity.We are talking about some 725 billion euros in financing, of which 170 billion corresponds to Spanish banks. They are little by little being reduced. It is still not known if they will be withdrawn completely. According to analysts at Morgan Stanley, replacing this quantity of TLTROs would not be a panacea for the banks.
The EBA published the results of the latest stress tests on 47 European banks, plus one in Norway. These covered 70% of banking assets in the EU and revealed that in adverse scenario they would produce a negative impact of -395 base points in the capital ratio CET1 fully loaded (-410 base points of the transitory definition) to place itself in 10% at the end of 2020 (10.3% transitory). The four Spanish banks, Santander, BBVA, Caixabank and Sabadell, overcame the tests although they came out a little below the average.
The ECB will stop injecting liquidity into the system next December. This leaves Eurozone banks in a slightly odd situation: returning to “normality” after years of atypical measures. The withdrawal of QE will have different impacts on different countries, depending on the characteristics of the models of their banking business.
J.L.M. Campuzano (Spanish Banking Assocation) | We are echoing the IMF’s recent report on the evolution of the European economy. All of Europe is seeing growth, but this has dynamic has to be supported by structural reforms which boost potential growth and best financing to achieve this.
In a note on regional commercial banks, AlphaValue analysts flag that lenders in southern European countries have been amongst the better performers in terms of share price and P/BV. Spanish bank Sabadell is amongst their top picks.
Analysts at Bankinter offer an investment strategy for the European banks ahead of the new year. Overall they reiterate their recommendation to maintain a structural position in banks due to the improvment in the quality of their balances and the recovery in business volumes.
The recovery seen in the banks’ activity at an international level at the beginning of this year has been temporary. In line with data from the BIS, the banks’ international activity fell $91 in the second quarter from the first. With the exception of loans to non-banking institutions.
Ratings agency Moody’s said yesterday that the European banks’ costs have increased due to the fact that the rise in regulatory and restructuring costs is eating up all the savings resulting from branch closures and workforce reductions.
José Luis M. Campuzano (Spanish Banking Association) |The ECB believes the net effect of a policy of zero interest rates (negative in the case of the deposit rate) has been positive for the revenues of the different economic players. But the impact has not been equal.