Passing on a clarifying (!?) note from Citi analysts…
“The first comments, which anticipate a much discussed and possibly without clear conclusions summit in Europe today, were disappointing. Especially on two, at the moment, important issues: banking and the EFSF. Also, the markets themselves were disappointing. Gold has again gone up sharply ($ 1,714 an ounce) as well as raw materials (crude oil $ 111.35 per barrel). This rise is due to the speculation on further liquidity expansionary measures from the US rather than to an improvement in economic expectations.
“Following all this, listening to more comments at European level that reduce expectations for the summit (we definitely agree with the Dutch finance minister Jan Kees de Jager’ declaration who said: ‘We have never said that the summit was definitive …. This came from the Anglo-Saxon press‘), perhaps what is even more surprising is that the EUR is now worth 1,392 USD. Why? Actually, the explanation it’s not so much in the EUR but rather in the USD. The crossing of the dollar against the JPY remains at 75.93: the lowest level in recent years. Yesterday we saw heavy buying of U.S. debt at 10 years returning to levels lower than 2.13%. Should we re-assess a short-term QE3?”
And another note from Banco Santander that will disappoint those looking for (more) alarming signals among Spanish banks’ stats:
“Grupo BMN and Liberbank have achieved their objective of privately recapitalizing. Grupo BMN (BBB +) and Liberbank (Baa1 n / BBB + e) have achieved their objective of recapitalizing privately to meet the capital requirements of the RD-Law 2 / 2011, without requiring the help of the FROB [the government’s capital fund for banking reform].
“Grupo BMN has done so through a mandatory convertible bond issue of €250-300mn, which will mean the entry into its shareholding of over 20% private capital. Liberbank did so largely thanks to €200mn capital gains from the sale of 77% of Telecable to Carlyle.
“Let’s remember that on September 30th, Banco de España granted a 25 day extension to both entities to complete the implementation of the new capital requirements adopted in Spain last February. All the other entities already meet the requirements (minimum core capital of 8% -10%, depending on the presence or absence of private capital in the capital, and the proportion of wholesale funding).”