Morgan Stanley | Bank analysts raised the sector to Attractive a few weeks ago because our macro no longer expects depo-type cuts and this increases confidence that profit estimates have hit a minimum in 2H19. We estimate a flat growth of the NII (+ 0.6%) in 2020 and 2021. There is optionality in the charge for deposits (could add 3% to the NII of the Eurozone banks).
Market concerns persist, and there seems nothing in the short term that will change this. In fact, the latest ECB Financial Stability Report gave evidence of the nest of problems and risks in which we have found ourselves for some time, while recalling the downside balance of current risks, analysts at Intermoney point out.
Eurozone banks are currently keeping 690 billion euros at their central bank, according to the ECB’s last figures. While the European Commission aims to achieve by end-2018 a completed banking union, this an evidence of a more fragmented market. Are lenders suspicious of their refinancing capability in order to honour their debts? And why is Ewald Nowotny asking to cut them some slack?
The impact of Brexit on the markets has gone through different stages. There was the initial upheaval in the wake of the referendum result, which had its maximum effect on June 24 when the Ibex recorded its biggest ever fall. And now the stock market and European public debt yields have recovered to pre-Brexit levels.
Based on our latest in-house banking survey, sentiment towards the banking sector has deteriorated further over the past quarter. The decline in expectations on the banking outlook reflected rising global growth concerns, uncertainty over Fed funds rates, as well as volatility in commodity prices and currencies.
MADRID | By Fernando G. Urbaneja | Spanish bank Santander is a powerful battleship, the euro zone´s largest by market cap, one of the world’s leaders, with an outstanding presence on both sides of the Atlantic. It is therefore a complicated engine to move, even slowly. The unexpected death of the company´s chairman, Emilio Botín, in September 2014, brought about the accession of his daughter Ana to the bank´s top post. The younger Botín possesses unquestionable professional credentials, but nonetheless has had to allay fears that any change in leadership can bring about.
BRUSSELS | By Alexandre Mato | Just 15 people will supervise the restructuring and liquidation of financial institutions from the beginning of 2015. The Single Resolution Board (SRB) will be composed of around 50 staff for this important task when it undertakes the remit in the spring.
MADRID | The Corner | Banco Santander CEO Javier Marín will leave eurozone’s largest lender after only two years in the role. Ana Botín, in charge of the bank after her father Emilio Botín died in September, announced Marín’s replacement by Jose Antonio Álvarez, who has spent the past decade as CFO. Ana Botín also made several changes to its board of directors. Shares in Santander rose 1.8% to 7.22 euros in Madrid following the announcement.
MADRID | By JP Marín Arrese | Potential mismatches between overall demand and supply can provide rather upsetting lessons. As Keynes proved, sticking to stability policies in a recession only widens the gap as slackening demand and production drag each other down in an endless spiraling circle. Moreover, he cast serious doubts on the strategy of combining loose monetary policy with balanced budgets for putting the economy back on track. His liquidity trap theory mirrors Draghi’s current warnings on the ECB’s limits in coping with a huge GDP gap.
MADRID | The Corner | The ECB doesn’t like the idea of allowing banks to use Deferred Tax Assets (DTA) to boost their capital buffers, a practice that was meant to be phased out under new European Union rules. The central lender fears that losses would be imposed on taxpayers should entities run into trouble in the coming years, as the WSJ reported. Even if the ECB doesn’t have the power to change that, and is not likely to make any move before the upcoming stress tests, it might push for DTA to be replaced by core capital.