20 European Banks short of capital
Filed Under (World Finance) by fred on 07-01-2010
Tagged Under : European banks
According to Bloomberg, about 20 European banks may be viewed as “too big to fail” by regulators and will need more capital, according to analysts at Barclays plc.
HSBC Holdings plc, BNP Paribas SA, Banco Bilbao Vizcaya SA have sufficient financial strength to cope with “too big to fail” status, while UBS AG, Credit Suisse Group AG and Royal Bank of Scotland Group plc will find it more “damaging” and will be forced to shrink, wrote analysts led by London-based Simon Samuels in a note to investors.
Banks also face higher funding costs as central banks withdraw e875 billion (e1 = RM4.86) of liquidity support, Barclays said.
“The next few years will be challenging for European banks as they deal with the withdrawal,” which comes as about e850 billion of maturing bonds need refinancing, Barclays said.
uropean banks have raised more than US$600 billion (US$1 =
RM3.39) in capital to withstand writedowns since the start of the credit crisis, according to Bloomberg data.
Banks must improve the quality of their capital by the end of 2012 to withstand losses better, the Basel Committee on Banking Supervision said last month.
Regulators should focus on making big banks safer rather than smaller, Barclays said.
“We are cautious on investment banking,” Barclays wrote in the report. “We see limited revenue growth over the next three years but, more importantly, significant regulatory and political risk.”
The brokerage also said “credit quality might positively surprise.” The analysts yesterday initiated coverage of 19 European banks with a “neutral” recommendation on the industry.
BNP Paribas SA, France’s biggest bank, and Deutsche Bank AG, Germany’s biggest, were rated “overweight”.
Barclays also rated HSBC Holdings plc, Banco Bilbao Vizcaya SA, Spain second largest bank, KBC Groep NV and Swedbank AB “overweight”.
Commerzbank AG, Germany’s second-biggest bank, and UBS AG, Switzerland’s biggest bank, were rated “underweight” by the brokerage.
Credit Agricole SA and Allied Irish Banks plc were also viewed as “underweight”.
