MSM Newsbytes on European Banks, Adjusted for Factual Analysis, This 14th Day of July, 2010

I have been sounding the alarm on the Spanish banking system since
January of 2009, and the Italian banks since the first quarter of this
year. Now, the MSM is starting to catch up. For those who have not been
reading my recent European work, I offer you The Pan-European Sovereign Debt Crisis series, for
all others – read on…

From CNBC: Eleven Banks
Will Fail EU Stress Tests: Strategist

Eleven banks including Germany’s
Commerzbank and Italy’s Banco Popolare will fail the European Union’s
stress tests, Alessandro Roccati, director at Macquarie Securities,
told CNBC Wednesday.

“We identify a handful of banks which
would need more capital in a base case stress scenario; these are: all
Greek banks, Bankinter, Postbank,
Banco Popolare, BCP,
Commerzbank and Sabadell,” a report
from Macquarie Securities said.

If BoomBustBlog subscribers recall, we had a very similar (if not
significantly more extensive) list in our 1st quarter warning of banks
exposed to the sovereign debt crisis (click here to subscribe).

• 
  Deutsche
  Bank vs Postbank Review & Summary Analysis – Pro &
  Institutional
• Deutsche
  Bank vs Postbank Review & Summary Analysis – Retail

• Spanish Banking Macro Discussion Note
• A Review of the Spanish Banks from a
  Sovereign Risk Perspective – retail.pdf
• A Review of the Spanish Banks from a
  Sovereign Risk Perspective – professional
• Banks exposed to Central and Eastern Europe
• Greek Banking Fundamental Tear Sheet
• Italian Banking Macro-Fundamental
  Discussion Note
• Irish Bank Strategy Note
• Euro Bank Soveregn Debt Exposure Final
  -Retail
• Euro Bank Soveregn Debt Exposure Final –
  Pro & Institutional
• Sovereign Debt Exposure of European Insurers and
  Reinsurers (Empty 2010-05-19 01:56:52)

Back to the article…

Even though the number of banks
likely to fail the test is relatively small, it may not allay fears on the health of the
overall European banking sector, the note said. Of the 46
listed banks being tested by the EU, only eleven will have insufficient
capital, but of the total 91 banks, including non-listed banks, the number will be
greater, Roccati said. “The key concern and the key
differentiating factor is actually the cost of credit and not the
decrease in revenues due to a slowdown of the economy,” he said.
European banks may need a minimum of 6 percent tier-1 capital ratio in
order to pass the stress tests, according to a Dow Jones report
Wednesday. Roccati pointed out that the current regulations require a 4
percent tier-1 capital ratio.

Banks that do fail the stress tests
may have some breathing space in which to raise capital as they are
unlikely to need to issue debt in the very short term, according to
Roccati. If the troubled banks can’t recapitalized themselves or be
funded by their sovereign governments, it will fall to the EU’s central
backstop fund to bail them out, he said. Given the concerns over the
sector, Macquarie said he favors BNP Paribas, UBS,
SEB, DnB NOR, Nordea,
and Erste Bank. Macquarie recommended
caution on Iberian and Greek banks.

Here is an excerpt from the subscription download: Italian Banking Macro-Fundamental
Discussion Note where similar banks are mentioned…

Also from CNBC.com: Spain
Banks’ ECB Borrowing Surges to Record High

Borrowing by Spanish banks from the European Central
Bank surged in June to a new record high, indicating tight
access to funding before the expiry of 442 billion euros in one-year
ECB loans at the start of July.

Data from the Spanish central bank
showed banks borrowed 136.49 billion euros from the ECB in June, a jump
from the 105.6 billion euros in May. Subtracting the amount banks
redeposited at the ECB, the total borrowed was 126.3 billion, a quarter
of the overall amount lent by the ECB

Considering Spanish
lending is a much, much smaller minority than that, it should tell us
in no uncertain terms that those financial Spaniards have some
unresolved issues!!!]

That figure was up from 85.6
billion euros in May. “It does appear that Spanish banks have increased
their reliance on ECB funding even further in June,” said Nick
Matthews, economist at RBS. “It’s probably down to two reasons. One,
banks may have taken more precautions before the repayment of 442
billion euros at the start of July, and  two, because of more funding
difficulties,” he added. Borrowing from Spanish financial institutions
from the ECB leaped in May from just over 90 billion for the first four
months of the year as interbank money markets froze and domestic banks
turned to Europe’s central bank for financing. Smaller banks in Spain
lost access to interbank markets in late May heading into June over
concerns that Spain could be the next country to face a debt crisis
similar to that of Greece, where banks are heavily dependent on ECB
financing.

For subscribers, we have modeled the Spanish government finances to
ascertain realistic deficit and debt levels:

Spain public finances
projections_033010

Keep in mind that Spanish banks hold a lot of
Spanish government debt as well as overvalued real estate loans.
Subscribers should also download:
Spanish Banking Macro Discussion Note

A Review of the Spanish Banks from a
Sovereign Risk Perspective – retail.pdf

A Review of the Spanish Banks from a
Sovereign Risk Perspective – professional

Comments

[traderjoe]

I like the depth of your analysis, just wish it wasn't punctuated with "I told you so back then" or "my subscribers have access to this" or "I've been saying this all along". Would make the information a bit smoother to read...we get the idea that you are a paid site.