European banks

Not just rates weighin on banking margins

It’s not just interest rates which are weighing on banking margins

José Luis M. Campuzano (Spanish Banking Association) | It’s been balance sheet adjustments and the worsening of the deliquency rate which have been mainly responsible for the deterioration in banking margins over the last few years. It’s important for the ECB to establish a clear strategy for monetary normalisation for the future.

BCE grandeTC

ECB July Meeting Minutes Reflect Continued Concern Over Banking Sector

José Luis M. Campuzano (Spanish Banking Association) | The most significant item in the minutes of the ECB Governing Council’s July meeting was the repeated reference to the banking sector. And particularly with regard to the massive beating banking stocks are receiving in the equity markets.

ECB on inflation

TARGET 2: Capital Flight From Italy And Spain Continues

Miguel Navascués | Take a look at the outstanding balances in the ECB’s TARGET2 payments system, which maintains an up-to-date record of the debts and loans each country has with the other. As can be seen from the table below and the subsequent graphics, Italy, where the banks have 360 billion euros of doubtful loans, as well as Spain, have again begun to show signs of weakness.


CoCos May Not Be As Good As They Look…But Investors Don’t Care

The European banks are having nothing but trouble in the last few months. And if they needed something else to further cloud their outlook – negative interest rates, meagre margins, increasing capital demands…- doubts have begun to emerge lately over whether the sector can continue to pay the high interest on the so-called CoCos (Contingent Convertible Capital Instruments), contingent convertible bonds.

cost of equity

The Cost Of Capital Is Rising –Yet It Is Hard To Estimate By How Much

Higher capital requirements after the financial crisis are pushing up the cost of capital for European banks. The key question is by how much, since the return on equity required in order to compensate investors for the risk they undertake can be difficult to determine because it is unobservable.

monte dei paschi

Others Are Doing Worse (But Everyone’s In The Same Boat)

Aristóbulo de Juan | This is the huge cost of complacency. You frequently hear Spanish bankers and supervisors repeating a new mantra: “The European banks are worse than ours and their supervision is more lax.” Europe’s oldest bank reveals an NPL ratio of 39%, while Deutsche Bank announces losses of 6.9 billion euros…but can this sort of management be allowed?

What lies behind the entry of Hudson into the capital of Deutsche Bank?

It’s Not All Bad About European Banks

UBS | What’s happening? Banks are trading at distressed PE and P/TNAV multiples. Emerging Market/China/ APAC slowdown and oil going to US$30 are potentially triggering a downturn in the credit cycle and concerns over credit/exposure quality in general.