Europe's Most Distressing Chart: For Banks 2016 Is Already Worse Than 2008

Tyler Durden's picture


As we have reported previously on various occasions things are bad for European banks: from DB's record wide 5Y Sub CDS, to Credit Suisse record low stock price, to everyone else inbetween. But did you know that for most European banks, 2016 is shaping up far worse than the dreaded 2008? As the following chart from Reuters shows, the year-to-date stock price performance for most European banks is on pace to far surpass - to the downside - the dreadful for the global financial system 2008.

As Reuters puts its it, "Euro zone banks have seen their shares plummet by nearly 30 percent and yields on their bonds surge since the start of the year, as investors worried about thinning profits and uncomfortably high levels of bad loans in some countries."

This is shown in the chart below.


One problem resulting from this collapse is well framed by Reuters: "A protracted selloff in the shares and bonds of euro zone banks has the potential to knock the fragile economic recovery off track by raising financing costs for banks, limiting their ability to lend. It may also undo some of what the European Central Bank has been trying to do to increase bank lending an pump up inflation via spending.

The selloff makes it more expensive for banks to raise capital on the market by selling shares or bonds.


If this situation were to last, it would dent banks' capacity to grow their balance sheets by extending new loans to companies and households. This would jeopardise a tentative rebound in lending driven by the ECB's ultra-easy monetary policy.


"This can have an impact on the economy, which is bank dependent in Europe," said Sascha Steffen, professor of finance at the University of Mannheim. "And of course it puts more pressure on the ECB because it doesn't help it bring back inflation."


Bank lending in the euro zone started growing again in 2015 after shrinking for three years, but data for December data pointed to a loss of momentum.


* * *


But the sheer magnitude of the market rout shows investors are losing confidence in the sector.  A key transmission channel is the market for Additional Tier 1 (AT1) notes - bonds that can be converted into equity under certain conditions and on which the issuer can decide whether or not to make coupon payments.


* * *


"For the past year, ECB easing has been accompanied by private banks' easing of credit conditions," said Marco Troiano, a director at ratings agency Scope. "If market volatility reverses this, banks would tighten lending, negating some of the ECB's efforts."

In other words, after the BOJ's and the Fed's recent policy failures, unless the ECB stabilizes Europe's banking sector, it too will have committed the gravest of central bank sins: policy error.

The problem, however, as Deutsche Bank explained very well in the post preceding this, is that there is a problem: while the market is desperately begging for a circuit breaker, nobody - certainly not the ECB - has any idea either what it should look like, or whether it could work.


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Fri, 02/12/2016 - 09:11 | 7175798 Budnacho
Budnacho's picture

*Makes popcorn....sits back*

Fri, 02/12/2016 - 09:12 | 7175804 VinceFostersGhost
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2016 Is Already Worse Than 2008


Theoretically......we could set a new record here.

Fri, 02/12/2016 - 09:19 | 7175837 Bernoulli
Bernoulli's picture

It's all contained to the banking sector.

Fri, 02/12/2016 - 09:22 | 7175848 SheepRevolution
SheepRevolution's picture

Damn... And we have barely even started with the crash!!! If S&P500 breaks 1750-1800, it's a long, long, loooooong way down...

Fri, 02/12/2016 - 09:25 | 7175856 new game
new game's picture

agree, this fucker goes red today or i'll be amazed at the ptb's influence both literally or by propaganda. there are way to many reasons not to buy/own stawks...

Fri, 02/12/2016 - 09:46 | 7175964 Dg4884
Dg4884's picture


Fri, 02/12/2016 - 10:07 | 7176071 Bernoulli
Bernoulli's picture

Everybody has seen that WTI crude has been bouncing up and down between 26 handle and 33 handle for the last weeks. A couple of dollars move up within this band can't possibly give hope for the broader stock market, now can it? The YEN moves are completely insane, a slight weakening can't possibly give hope, can it? Deutsche buying back a couple of bonds and desperately trying to show they are solvent can't possibly give hope ("The Bank's strong liquidity position allows it to repurchase these securities without any corresponding change to its 2016 funding plan")? All of these "explanations" are ridiculous!

With China reopening Sunday night and Monday being a day off in the US, there is simply no way anybody would buy stocks today!?!? Or do some "fear to miss out on a rally" next week??

I have no explanation other than "Total and utter manipulation" if the markets don't go red latest by the European close.



Fri, 02/12/2016 - 09:47 | 7175970 iggenFlot
iggenFlot's picture

I'm under the kitchen table with my Mountain House and Silver Eagles shaking like a goddamn leaf. It's collapsing all around us!

Fri, 02/12/2016 - 09:25 | 7175857 thunderchief
thunderchief's picture

CNBC says bank stocks are  buy right now.

Gartmen says wait on buying gold its going lower.

They say when the tide goes out you see who'swearing a bathing suit...

No, when the tide goes out you see jerkoffs like Gartmen and CNBC telling everyone its ok, and not a tsunami. 

Fri, 02/12/2016 - 09:45 | 7175960 Dg4884
Dg4884's picture

Riiiigggghhht...  I may have been born at night, but it wasn't last night!

Fri, 02/12/2016 - 10:39 | 7176250 open-range
open-range's picture

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do...

Fri, 02/12/2016 - 09:15 | 7175818 buzzsaw99
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mark it zero

Fri, 02/12/2016 - 09:22 | 7175843 Ghordius
Ghordius's picture

mark it as... interesting. like the question: is this evidence for the absence of a "Plunge Protection Team" in european markets? or the other question: is this evidence for the ECB not supporting eurozone bank stocks? or the last question: is this all an effect of China selling 100 frigging billions of FX per month since Nov, and are "some parties" scrambling to buy all this... and selling european financial stuff to finance it all?

as often, the most interesting questions are not those that get answered, then a sheer lot of money can be done playing on them  /stuart

Fri, 02/12/2016 - 09:32 | 7175875 buzzsaw99
buzzsaw99's picture

the way i see it the ecb and ptb tried to support the rotten edifice that is the european banks by putting a bid under sovereign debt. they thought they could bullshit the market. however, just like japan, once the central banks go down that road they have to buy it ALL. japan didn't realize that, the usa doesn't realize that, and europe doesn't realize that, until now. they have killed capitalism. the first loss is the best loss. they will not do the right thing until they have utterly exhausted themselves doing the wrong things.

Fri, 02/12/2016 - 09:59 | 7176028 Ghordius
Ghordius's picture

of course the ECB buying up sovereign debt shores up... sovereigns. but does it shore up european banks?

it all goes back to one very important point, imho: the US banking system is made out of megabanks and... lots of dead small banks. some 3'000 died, from memory

the european banking... national systems have their megabanks, too (some of them)... and a lot of small/regional banks that are very, very dear to... well, let's start with the regional political elites

meanwhile, you talk about "the market" as if it was a kind of god, singular, instead of crowds of people, investors and... megabanks and hedgefunds. oh, and sometimes cbs

we'll see, but I start to think a few heretical thoughts that cannot be substantiated until the US megabanks publish again their balance sheets, and by then it might be a completely different situation altogether  /stuart

Fri, 02/12/2016 - 09:16 | 7175820 Cautiously Pess...
Cautiously Pessimistic's picture

Well, at least Europe has managed to get that whole migrant crisis under contro......  wait, what's that?  More on the way now??  Uh... nevermind.  As you were.

Fri, 02/12/2016 - 09:16 | 7175821 petaloka
petaloka's picture

Wait til you see 2024!

Fri, 02/12/2016 - 09:17 | 7175826 buzzsaw99
buzzsaw99's picture

end of the world? total eclipse?

i must know. [/inigo montoya]

Fri, 02/12/2016 - 09:42 | 7175945 Dg4884
Dg4884's picture


love that movie.  A battle of wits...

Fri, 02/12/2016 - 09:41 | 7175938 Dg4884
Dg4884's picture

I wonder how much codine i will have injested by then?

Fri, 02/12/2016 - 09:18 | 7175823 Dre4dwolf
Dre4dwolf's picture

Money is fleeing Europe.

The smart money is moving out as the dumb migrant rapists move in XD

I guess Jihadists aren't lining up around the block to open a checking account at Douchebag Bank

Fri, 02/12/2016 - 09:19 | 7175833 buzzsaw99
buzzsaw99's picture

the smart money has been moving out of europe for hundreds of years.

Fri, 02/12/2016 - 09:17 | 7175827 Bill of Rights
Bill of Rights's picture

Nothing -%.0000000000000000001 rates can't cure.

Fri, 02/12/2016 - 09:27 | 7175849 Dr. Engali
Dr. Engali's picture

Are they really policy errors? Maybe they want this chaos to serve a larger purpose.

Never let a good crisis go to waste.

~ Rahm

Fri, 02/12/2016 - 09:39 | 7175930 Dg4884
Dg4884's picture

Don't jest.  You are on to something here.  Gotta break it down before you can build your utopian dream...

Fri, 02/12/2016 - 09:25 | 7175859 silverer
silverer's picture

Well, there you go. Every reason you'll ever need to dump your silly gold and totally count on the reliable paper produced by these models of perfection. Do I need the sarc tag?

Fri, 02/12/2016 - 09:25 | 7175861 wildbad
wildbad's picture

anythig new to say?

Fri, 02/12/2016 - 09:28 | 7175867 FreeNewEnergy
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ZH Headline circa 2024:

ECB Slashes Rates to -15%, Most since Deutsche Bank; Draghi Hung By Muslims Protesting Violation of 'Safe Space'

Fri, 02/12/2016 - 09:38 | 7175921 Element
Element's picture

lol ... that's dark ...

Fri, 02/12/2016 - 09:28 | 7175869 Latitude25
Latitude25's picture

Yeah and US banks are all just fantastic huh?

Fri, 02/12/2016 - 09:30 | 7175877 Whoa Dammit
Whoa Dammit's picture

The crux of the problem is in this sentence:


The selloff makes it more expensive for banks to raise capital on the market by selling shares or bonds.

Banks should be raising capital through deposits, not through their stock prices. But they refuse to pay interest on savings, so now banks can no longer raise capital as a depository institution,in a traditional banking manner. At some point, they are no longer banks.

Fri, 02/12/2016 - 09:32 | 7175890 LawsofPhysics
LawsofPhysics's picture

So it really is the worst "since Lehman" (TM)?  LMFAO!!!

Time for a refund or serious retribution!!!!

Fri, 02/12/2016 - 09:37 | 7175914 Dg4884
Dg4884's picture

So markets are on their way back up today based on a bogus UAE crude tightening last night, and WTI at $27?  WTF is wrong with this market?!  Let's not consider that it is down 3,000 points from it's 2015 highs. 

These people must die.

Fri, 02/12/2016 - 09:40 | 7175931 THE DORK OF CORK
THE DORK OF CORK's picture

This is in reality a crisis within the European debt slave market.

The slaves can no longer afford the usury and depreciation charges.

This results in the banks going's that simple really.

Fri, 02/12/2016 - 09:49 | 7175984 Huh Reeeally
Huh Reeeally's picture

Interesting, however it would help if the # shares outstanding for those years were available. On second thought, it probably doesn't matter much, bad is still bad and and it's always someone else's fault.

Fri, 02/12/2016 - 11:07 | 7176394 Kina
Kina's picture

Get all the bad banks together and have Superman fly them into the Sun.

Fri, 02/12/2016 - 12:52 | 7176881 MASTER OF UNIVERSE

For every action the CB takes there is an equal opposite reaction that ensures the CB is as useless as a tit on a Boar.

Welcome to the zero sum end game, Mr, Central Bankster.

Have a nice day, eh.


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