Bankinter : The chairman of the ECB’s Supervisory Board, Andrea Enria, highlights the soundness of the sector and considers that the shareholder remuneration policy (average pay-out ~50.0% of NAB) is reasonable. Banking rose +4.79% on Tuesday. Positive highlights: UBS/Switzerland (CHF 19.42; +12.2%); Commerzbank/Germany (CHF 10.02; +7.4%), Sabadell/Spain (CHF 1.07; +7.5%), Unicredit/Italy (CHF 17.42; +6.9%), ING (CHF 11.16; +5.9%) and BBVA/Spain (CHF 6.57; +5.4%).
Analyst’s view: Sector fundamentals are good (liquidity, solvency & credit quality), valuations attractive (P/CV ~0.3/0.8x), dividend yield high (>5.5%) and the regulatory framework in EMU is stable. The ECB reiterates its commitment to financial stability – unlimited liquidity? and confirms the seniority of bondholders/AT1 over capital in case of intervention or liquidation (which is good for bonds & the cost of bank funding).
In the US, the intervention of SVB & Signature Bank, has been swift and successful because: (i) investor interest in the assets of both entities (banks & mutual funds) is growing and (ii) the Fed is working on increasing guarantees for all depositors. On Tuesday, Janet Yellen (US Treasury) confirmed that the government is ready to cover all customer/deposit money if there are more bank failures. For reference, US banking rose +4.9% yesterday with regional banks leading the gains: First Republic ($15.7; +29.5%, Pacwest Bancorp ($12.21; +18.7%) and Western Alliance ($33.5; +14.9%).
