Greece has had a break from the headlines recently, but how long can it last? With a banking system that’s soon going to need shoring up again, probably not long. Read more
We missed this on Tuesday — the ESM’s answer to a fairly important ESM legal question.
(KR = Klaus Regling, ESM chief) Read more
Well, see if you can make out what they’re saying here.
The Spanish bank posted a €4.4bn loss late on Friday night, requiring the Spanish government to inject ‘transitory’ capital “con carácter inmediato” months before a proper, EU-led restructuring and recap plan for the Bankia group is drawn up.
Yes, this bank is still a disaster zone. Read more
Lend at low rates, for a long term.
It’s one way Spain’s official creditors could believably renounce seniority in the bailout. Concessional loans would make it easier for Spain to refinance its debt stock as a whole, improving bondholder recovery, while recapitalising its banks. Arguably. Read more
The Eurogroup finance ministers have inched things forward with their long Monday summit, but the press conference in the early hours of this morning also reaffirmed that many big questions remain.
The first headline is that Spain gets an extra year to meet its 3 per cent deficit-to-GDP ratio target. Just as well, because the country was extremely unlikely to hit that by the end of next year. The Journal reports that a draft statement says this means Spain can now run a 6.3 per cent deficit this year without risking penalties, compared with 5.3 per cent under the 2013 target. Read more
Starring A. Spanish Banker as the Cookie Monster, bank assets as cookies, and Mario Draghi as the Count:
Both: Eat! Count! Eat! Count! Eat! Count! Read more
Also a mandatory increase in real estate loan provisions to 45 per cent.
Selected flashes from Spanish economy minister’s press conference at pixel time… Read more
We’re shocked (shocked!) that Commerzbank has rolled out a €1bn capital increase now that European bank equity isn’t a total disaster area. Having not done it when it was.
By executing this transaction Commerzbank intends to take advantage of a favourable market opportunity to further improve its capital structure…
No deleveraging because of our recapitalisation exercise, really — or if there is, you’ll hardly notice it. So says the European Banking Authority in a Thursday night release:
(Warning: pie charts follow) Read more
A rough ride for UniCredit shares, and rights to buy its shares as part of the bank’s €7.5bn cash call, on Monday — they fell, got suspended limit down, and are dropping again (down 6.4 per cent) at pixel time.
It’s the rights’ first day of trading, so it’s worth asking why it’s so volatile. Read more
Spain says it expects its banks to set aside up to €50bn in further provisions on their bad property assets as part of a new round of reforms for the country’s financial sector, according to the FT. Luis de Guindos, economy minister in the centre-right government that took office two weeks ago after defeating the Socialists, said on Wednesday it was essential that the banks clean up their balance sheets without imposing a burden on the treasury. The €50bn figure, equivalent to about 4 per cent of Spain’s GDP, is higher than private expectations by bankers. That is the path now being taken by the government with Mr de Guindos saying there should be another round of consolidation amongcajas, or savings banks.
This is a reader appeal — just why are there so many banks working on Unicredit’s new rights issue? We still can’t work it out:
In addition, the Company informs that, following today’s Board of Directors meeting, the underwriting agreement related to the transaction was signed. The underwriting syndicate will be coordinated and led by BofA Merrill Lynch, Mediobanca and UniCredit Corporate & Investment Banking who will be acting as Joint Global Coordinators and Joint Bookrunners and will include, in addition to BofA Merrill Lynch and Mediobanca, Banca IMI, BNP PARIBAS, Credit Suisse, Deutsche Bank, HSBC, J.P. Morgan, Société Générale and UBS who will be acting as Joint Bookrunners; ING, Nomura, RBC, RBS and Santander who will be acting as Co-Bookrunners; BBVA, Credit Agricole CIB, Mizuho International plc and MPS Capital Services who will be acting as Co-Lead Managers and BANCA AKROS S.p.A., Banca Aletti & C. S.p.A., Banca Carige S.p.A., Equita SIM S.p.A., Intermonte, Investec Bank plc and Keefe, Bruyette & Woods, Ltd who will be acting as Co-Managers. The underwriting syndicate members have committed, severally and not jointly, to subscribe any new ordinary shares that should remain unsubscribed at the end of the Offering and of the following offer on the MTA of the unexercised subscription rights pursuant to Article 2441, paragraph 3, of the Italian Civil Code, up to a total amount of Euro 7.5 billion. The underwriting agreement contains, inter alia, usual clauses which condition the effectiveness of the underwriting commitments or which grant underwriters the right to terminate the agreement, in line with international best practice…
On Thursday, of course, arrived more details of the long-awaited European bank recapitalisation — we covered that specific part of the day’s outcome here, and mentioned that the EBA did its level best in the Q&A to quell worries that this would lead to widespread bank deleveraging and the ensuing crunch de crédit.
The language was tough and, to our eyes, vaguely threatening (emphasis ours): Read more
Updated — We’ve added a bit more on how the EBA might treat convertible bonds as part of the capital targets. Also see the FT’s reporting on the issue.
The key chart from the European Banking Authority’s release late on Wednesday night (featuring as its target the widely trailed 9 per cent Core Tier 1 capital rato for banks): Read more
Whatever happens in the eurozone this week, banks will have new capital ratio targets. They are not going to raise enough actual new capital to meet them.
Ergo they flip the ratio and start burning off risk-weighted assets. Read more
BNP Paribas and Societe Generale have denied a report that they could seek to raise a combined €11bn as part of a broader European bank recapitalisation plan, says Reuters. Le Journal du Dimanche newspaper had reported that France’s first and second largest banks by market cap would seek about €7bn and €3-4bn, respectively. A BNP spokeswoman denied the report, reiterating that it planned to reach Basel III capital targets without a capital increase. SocGen also denied the report and also said it would reach Basel III targets without a capital increase. The Journal du Dimanche report, which did not cite sources, follows one in German daily Frankfurter Allgemeine Zeitung saying that the top five French banks had agreed to receive €10 to €15bn in fresh capital from the French state as long as Deutsche Bank agreed to a government capital injection as well.
Angela Merkel, the German chancellor, and France’s President Nicolas Sarkozy spelt out their determination to defend the stability of the euro as they met for a bilateral summit in Berlin, the FT reports, but refused to spell out any further details of their plans. Mr Sarkozy insisted that the two leading governments in the eurozone were pursuing a common course, and were ready to announce a comprehensive package before the summit of the G20 leading global economies in France at the beginning of November. The only concrete statement they made, however, was Ms Merkel’s announcement that “we are determined to do whatever is necessary for the recapitalisation of our banks”. There was no sign that the two governments had yet managed to resolve their differences over whether the cash for such an exercise will come from national treasuries or from the €440bn EFSF. Bloomberg says the focus on what both called a “durable” solution signals a willingness to accept more extensive haircuts for bondholders, which Mr Sarkozy has resisted. Separately, Wolfgang Schäuble, German finance minister, told Frankfurter Allgemeine Sunday that the participation of private creditors in the latest Greek rescue plans for Greece might have to be reviewed, and German news agency DPA, citing unnamed people involved in the negotiations, reported that haircuts of up to 60 per cent were being discussed.
There’s something important missing from this recent Goldman call: (from a note earlier in the week)
We are not convinced that an effective ring-fence [for bank capital from a Greek default] is a realistic concept. This said, we show that if we apply an incremental 60% cut on Greek sovereign debt and a 10% cut on remaining credit exposures, European banks could face an additional €76 bn of pre-tax losses, of which the overwhelming majority is with the Greek banks (€54 bn). Read more
Asian markets responded less enthusiastically on Wednesday, after US stocks staged a dramatic rally late the previous day that was attributed to hopes of aid for eurozone banks and further US monetary easing. The ex-Japan MSCI Asia index was 0.3 per cent higher, and the Nikkei and Korea’s Kospi indices were both lower, Reuters reports. The S&P500 had closed up 2.25 per cent on Tuesday. Markets surged late on Tuesday after Olli Rehn, European commissioner for economic affairs, told the FT that co-ordinated recapitalisations of financial institutions were being considered. “Capital positions of European banks must be reinforced to provide additional safety margins and thus reduce uncertainty,” Mr Rehn said. “This should be regarded as an integral part of the EU’s comprehensive strategy to restore confidence and overcome the crisis.” Investors were also encouraged by a speech by Federal Reserve chairman Ben Bernanke to Congress, which Reuters says was seen as leaving the door open for another round of quantitative easing policies.
European officials look set to speed up plans to recapitalise the 16 banks that came close to failing last summer’s pan-EU stress tests as part of a co-ordinated effort to reassure the markets about the strength of the bloc’s banking sector, the FT reports, citing a senior French official who said those banks would now have to seek new funds immediately. Although there has been widespread speculation that French banks are seeking more capital, none is on the list. Other European officials said discussions were still under way. The Euroepan Banking Authority had given those banks until April 2012 to implement plans to shore up their capital buffers. While the banks are expected to turn to private markets first, officials said that state aid may be required. The French government appears to favour using the European financial stability fund, but other member states are likely to argue for national action.
We’ll resist any further “spillover” jokes as we pass along the main points from this earlier article by our colleagues in Europe, which for mysterious reasons appears to have prevented today’s selloff from being worse:
European officials look set to speed up plans to recapitalise the 16 banks that came close to failing last summer’s pan-EU stress tests as part of a co-ordinated effort to reassure the markets about the strength of the 27-nation bloc’s banking sector.
Some more ‘Hard Facts‘ from the French banking sector.
Tuesday’s early price action in SocGen and BNP Paribas. Read more
The sovereign bank cycle in Europe will not die — chart via the Morgan Stanley analysts Huw van Steenis and Alice Timperley:
What with being dead and all, Anglo Irish will probably not have a starring role in Ireland’s fifth attempt at recapitalising banks, due at 4.30pm (Dublin time) this Thursday.
That would be a shame. Read more