4-July-14
Bankers call it the "announcement effect." As one European bank to raise capital, the focus shifted to pressure opponents weak on the balance sheet and its increase to strengthen their capital position.
"The pressure is there, which is why you will see people raise funds," Gerald wave Duobunike, Head of Capital Solutions Deutsche Bank said. "Regardless of the current Basel III implementation schedule, in all market needs faster than originally thought."
Enthusiastic investor’s euro zone bank equity has allowed lenders to pack onto the dash ahead of ECB funds, which comprise the consolidated balance sheet asset quality assessment review (AQR) and stress testing.
But regulators warned that the sector continues to suffer from crush margins and deteriorating loan quality, which may leave some investors disappointed.
Euro zone banks to raise € 450 million common shares of tier one capital - the main measure of financial strength - between July last year and May 2014, including declared but not yet completed transactions, numbers released last week, according to the European Banking Authority.
More recent examples include last week's Millennium BCP, Portugal's second largest bank launched a rights issue of 2.25 billion €, and Monte Carlo DEI PASCHI Siena, Italy's third-largest bank last month completed a € 50 Rights Issue .
Deutsche Bank, which is to improve the € 80 billion in new capital, estimates, European banks have raised almost € 35 billion of capital replacement level - since last October - contingent convertible capital or "cocoa", you can switch to equity in a crisis form.
"The ECB's asset quality review and EBA stress tests are driving the activity has a number of agencies have predicted impact and to raise funds, especially in southern Europe," Stephen Carter, co-head of Credit Suisse Financial Institutions Group in Europe say, the Middle East and Africa.
Mr. Carter said that European banks have five main options to raise capital levels: a combination of deleveraging through the sale of assets; sales operations; publicly listed subsidiary; do a rights issue; or issue non-dilutive instruments, such as Tuckahoe.
Banks are expected to record sales in 2014 of € 800 billion African-core loans, from € 640 billion, last year's EBA added last week published a risk assessment. Lenders are also selling a subsidiary, as UniCredit's flotation this month Fineco, Italy's leading online bank with € 22 ? valuations.
Given the extent of the balance sheet strengthening, some investors are not expecting significant tracts when a failure occurs, the results of stress tests AQR and published this fall.
Pacific Investment Management Company, the Investment Manager, said Philip Bodereau ECB exercises may turn out to be a "damp squib bit."
It has failed in most of the bank's risk is Italian, German and Portuguese lenders, many are now raising the capital, he said, adding that nine Italian lenders by AQR and stress tests to raise capital or five people have been doing it.
"The market has been willing to give this year, the bank's capital adequacy ratio - the appetite is huge - so if you get to November, and ultimately failed to pass the stress test, which would be unacceptable failure by the board and management," he said .
Nevertheless, analysts and bankers say, may also find themselves under pressure from the pressure test and AQR, lenders including State Bank of Germany, such as NordLB and HSH Nor bank, Austria lenders with high risk of central and eastern Europe, such as Erste Spanish medium-sized banks and institutions such as Banco Sabadell.
Similarly, they pointed out that compared with competitors recently proposed equity risk some banks look like they lack funds. Lenders loaded ordinary share capital under Basel II Tier III regulations, such as the German commercial bank, Santander, Spain and the UK the proportion is less than 10 per cent of Barclays, may decide to raise additional funds, even if they hope that through stress tests and AQR comfortable.
"If you have a healthy stock market then you might decide who take advantage of this, some voluntary option breeder independent AQR pressure or stress tests," a senior banker who advises financial institutions.
Recent large pay fines, such as BNP Paribas and Credit Suisse, the bank may also feel the need to top up their capital levels, said a senior banker.
At Berenberg Bank analysts expect Europe still faces a shortage of € 3000 billion of funds - fell from € 4000 billion last year - said they "still believe that the absolute level of equity capital relative to the history and future potential demand is too low to maintain. "
The EBA estimated level of ordinary shares of the largest European bank capital ratio stood at approximately 11.6% in December - roughly equivalent to the Bank of America - as a mechanism to strengthen its financial position.
However, the pan-European regulatory agencies cited that are set to block the fate of the sector this year, the annual trend. Some of the bank's loan portfolio quality continued to decline in 2014, for example, and rising penalties to be set to full-year profit compression.
In less than 4% of the bank's return on equity accounted for almost two fifths of the total assets of the 57 samples leading European banks in risk assessment report, released last week on Wednesday found the EBA's.
Most bankers and analysts questioned believe EBA 10-12% of the equity value in return is the right target for the "long-term viability" of their business.
In this regard, EBA said, was "a worrying situation, which with the new regulatory environment and the combination of moderate growth prospects will continue to show the challenges of managing in a sustainable business model for some of the banks concerned," it added that "smooth exit of the weakest and least profitable bank" will contribute to the efficiency of the sector.
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