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European banks

In Europe 26th December 2020

European Banks: Becoming More And More Utility-Like

Scope Ratings | The pandemic showed that in times of crisis, politicians, supervisors, and central banks are willing to extend significant help to the banking sector. No major European bank has come close to resolution this year; nor will any in the near future in our view. Credit markets took note. After an initial scare in March, senior spreads tightened close to pre-crisis levels. Our view is that banking is turning into utilities and that the sector is becoming what it should be: boring. 

In Europe 15th December 2020

Covid-19: The First Real-Life Stress Test For European Banks Since Post-GFC De-Risking

Scope Ratings | European banks have proven resilient in the face of Covid-19. There has been no banking crisis and no bank has come close to resolution. Supportive fiscal, monetary and supervisory policies have offset credit, funding and solvency risks. Most banks entered the crisis with healthy balance sheets. Balancing the stabilisation effect of the expected rebound against asset-quality deterioration, and factoring in business-model adjustments will underpin our rating approach to the EU banking sector next year.

IBEX, In Spain 14th December 2020

The Bank Of England Lifts Restrictions: Santander UK May Return To Paying A Dividend

According to the central bank, the lenders will be able to resume payments once their adequate capitalisation has been verified. The Bank of England urges prudence regarding the return of dividends and will maintain some requirements. These include not exceeding 25% of the profits of the last eight quarters, or 0.2% of their risk-weighted assets. Everything points to the ECB lifting its veto on dividends tomorrow.

In Europe 13th October 2020

European Banks’s ROE plummets to 0.01% in Q2’20 Vs 6.01% Yr Earlier

Intermoney | The ECB has published devastating data on the Eurozone banks. It revealed a ROE of 0.01% in Q2’20 compared with 6.01% a year earlier; a figure that was negative in the major institutions in 7 of the 19 countries in the euro area. In this context, non-performing loans remained almost stable at €503 Bn, allowing the NPL rate of the large banks in the EMU to fall to 2.94%. This was in a fictious manner, however, as it was thanks to state guarantees and, above all, the moratoriums on loan payments. 

European banks

In Europe 22nd September 2020

European Banks: Six Months Into The Pandemic, A Tougher Spot But No Crisis

The European banking landscape does not look much worse six months into the pandemic-triggered economic crisis than before Covid-19 struck. Loan-loss provisions are higher, there is negative pressure on top-line revenues and gloomy market predictions linger. But the prospect of a new banking crisis is remote. The principal merit goes to the regulatory architecture set up in Europe after the Great Financial Crisis.

In Europe 21st September 2020

ECB Temporarily Relaxes Capital Requirements To Weather Covid-19

The European Central Bank has decided to allow the lenders it directly supervises in the region, on a temporary basis until June 27, 2021, to exclude certain exposures to the central bank from their leverage ratio. In this way, the institutions will have more room to incur debt since the ECB will not require more capital for it. In fact the ECB will not take into account the liquidity (cash and deposits) banks hold at the central bank when calculating the leverage ratio (Capital/Assets).

Euro area growth: neither very fast nor particularly slow

In Europe 11th September 2020

European Cross-Border Bank Mergers: Less Compelling After The Pandemic Than Before

EU agreement on a pandemic fund boosted market and regulators’ wishes to move towards cross-border consolidation among European banks- the ECB’s vice-president, Luis de Guindos, has already warned of the need for the sector to continue with the merger process. Scenarios have started to be built again about who should be merging with whom. But unity around the EU pandemic fund is not about banks, say analysts at Scope Ratings.

In Europe 3rd August 2020

ECB’s Extended No-Dividend Recommendation: A Quid Pro Quo That Could Have Adverse Consequences

The ECB has finally decided to extend from 1 October this year until 1 January 2021 the recommendation to banks to not pay dividends to their shareholders. Nicolas Hardy, Analyst of Financial Institutions at Scope, thinks this measure is positive in the short term, but could be questioned in the long term as EU banks are facing different operating conditions in the wake of the pandemic.

In Europe 9th June 2020

The Spanish And Italian Banks Are The Least Capitalized, With A CET1 FL Of 11.9% And 13% Respectively

Santander Corporate & Research | Yesterday, the European Banking Authority published its 2020 transparency exercise, which takes data from individual banks at end-2019. The EBA’s findings indicate that the EU weighted average CET1 fully loaded capital ratio stood at 14.8% in Q4’19. Also yesterday, the European Systemic Risk Board (ESRB) published a second set of measures adopted in response to the coronavirus emergency, which include a recommendation to restrict capital distributions until January 2021.

The EBA proposes modifying stress tests

In Europe 26th May 2020

European Banks: Asset Quality Ratios Are Not Proportional To The Extent Of Their Impairment Due To Covid19

Santander Corporate & Investment | Yesterday, the European Banking Authority (EBA) published a report with a preliminary assessment of the Covid-19 impact on the EU banking sector. The EBA flags up the fact that banks “entered the health crisis with strong solvency and liquidity reserves and managed the pressure on operational capacity by activating their contingency plans”. It also flags that “the crisis is expected to affect asset quality and therefore the future profitability of banks.