Spain, Italy, Germany and Austria the markets with highest options of banking M&A

The year has just started with the banking sector rising stronglyThe banking sector is rising strongly

Moody’s rating agency expects more mergers amongst the European banking sector.The catalysts which could fuel greater consolidation are basically the large amount of unproductive assets on the balance sheets of some banks (above all in Italy) and the sector’s low levels of profitability. According to Moody’s, the markets where there are the highest possibilities of integration are Spain, Italy, Germany and Austria.

With regard to the Spanish banking sector, it is worth pointing out that Moody’s believes the lenders are under less pressure to reduce their unproductive assets, thanks to the improving economic cycle and increased profitability at the operating level.

Indeed, the Spanish banks’ gross operating margin is 1.4% of total assets, while in other European countries this is below 1.0%.

On the other hand, the European Banking Authority (EBA) has significantly cut its forecasts related to the sector’s financing needs in order to comply with the Minimum Requirement for Own Funds and Eligible Liabilities (MREL). According to the EBA, the European banking sector would need  additional funding of between €66.6 billion and €298 billion to comply with new regulatory requirements. These estimates are significantly lower than the ones released five months ago when the EBA predicted funding needs of between €130 billion and €790 billion.

Bankinter consider that the EBA’s estimates anticipate less regulatory pressure in the coming years and are good news for the sector.


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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.