Goldman Raises European Banks From Underweight To Neutral

Tyler Durden's picture

Goldman has just started selling European bank stocks to its clients, whom it is telling to buy European bank stocks. Said otherwise, the stolpering of clients gullible enough to do what Goldman says and not does, has recommenced. Our advice, as always, do what Goldman's flow desk is doing as it begins to unload inventory of bank stocks. Translation: run from European bank exposure.

From Goldman

Raising banks from underweight to neutral


We are shifting our recommendation on banks from underweight to neutral. We shifted to an underweight position recently. This was based on our view that the economic environment was deteriorating. The combination of weaker growth and the need to shore up balance sheets was, we felt, likely to be a significant headwind and reduce demand for corporate loans while also increasing NPL’s. Furthermore, the sector is becoming more domestic as banks sell assets outside their main markets.


While all of these concerns remain, the new funding arrangements agreed by the ECB and other central banks should significantly help the banks offset the pressures of the economic downturn in our view. The coordinated action by central banks last week has brought a reduction both in the rate (down to OIS+50 bp; previously OIS+100 bp) and margin (down to 12%, previously 20%) while giving commercial banks access to US$ through this channel. In a further positive surprise, the ECB is also now offering banks 3-year liquidity (full allotment, fixed rate), on an expanded collateral pool (which now includes loans) and a lower reserve ratio. According to our banks analysts (see “Capital story is ending, funding receives a large ECB boost” December 9, 2011) the scope and structure of this facility directly addresses the banks’ key funding concerns.


The 3-year duration will address mismatching issues while an expanded collateral pool and lower reserve ratio increase the scope for banks to get access to liquidity. The interest rate structure meanwhile allows banks to detach their funding cost from that of sovereigns, which has been one of the key factors that has kept the risk premium on banks so elevated. As a result, our banks analysts expect a positive impact on margins, deposit pricing and loan availability resulting in a high take up of the facility. While these facilities help to reduce the risk premium to some degree they should be seen against the ongoing deterioration in fundamentals so that, on balance, we feel a neutral in the sector is appropriate.

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SheepDog-One's picture

Goldman shifted from underweight 'buy' to neutral 'start dumping to the dupe funds'.....allrightey then!!

CORNGUY's picture

How do we know Goldman is selling?

SheepDog-One's picture

Because theyre telling others to buy.

TruthInSunshine's picture

Please, Goldman, please; have Abby Joseph Cohen come out & speak bullishly on Eurotrash Banks AND put a bunch of said institutions on your 'conviction buy list.'

Take it to the limit

One more time

MarketTruth's picture

Anyone who believes Goldman Sachs...

Michael McDonald "What A Fool Believes"


Sudden Debt's picture

All in the clients best interest....

DoChenRollingBearing's picture

I think I will just push the ¨Ignore¨ button on Goldman Sachs...

fonzanoon's picture

What a tangled web of bullshit. So ZH reports that Goldman, DB and you name it have been begging, pleading for the ECB and Fed to print like all holy hell, or else. This agreement has none of that in it, and Goldman is raising their outlook based on this agreement?


HelluvaEngineer's picture

Sure.  Most likely someone is about to be punished.

Dr. Engali's picture

Well I wonder if they can con any suckers into buying? Time to go short.

Irish66's picture

that is sick and shameful

alien-IQ's picture

Sick and Shameful is just a branch of Goldman Sachs.

Captain Kink's picture

They acquired Sick & Shameful, LLC when they merged with Smoke & Mirro in 2003.

SheepDog-One's picture

Its Goldman Sachs, the Synogogue of Satan.

MiddleageThinninghair's picture


Do you mind creating a permanent video link to some of the trader pits to confirm that there are people actually buying and selling and not some janitor playing a computer game in a basement office?  I find myself less and less able to believe that individual people are actually participating.


Thanks in advance.

mktsrmanipulated's picture

there are no more pits.....its all done via algo's

firstdivision's picture

SPY erased yesterdays losses now.  I bet Robo has a hardon today. 

DoChenRollingBearing's picture

+ 1  

Excellent LOL there, Cap´n!

slaughterer's picture

Goldman rightly points out that the interest rate structure delinks sovereign and finance sector risk, which is what the S&P wants to see from the EZ in considering them for a rating change.  But it seems crazy to say that this will offset the pressures of the economic downturn.  The summit, infact, did nothing to plan a growth strategy, and will surely (I am100% certainhere) reault in a slew of S&P downgrades because of that.  Besides GS has its eyes on running the secondary offerings for all of those EU bank; no doubttheyhave to upgrade for that sucker feeding fest.  

GeneMarchbanks's picture

'stolpering of clients'

Hehe. Jeez you didn't even capitalize(unintended) that putz' name...

Sunshine n Lollipops's picture

Yeah, I had to Google that one. Thought maybe it was a new word in the Urban Dictionary for corn-holing. 

alien-IQ's picture

"and it's more than a bad that I'm sober"

Tom Waits
More Than Rain

LeBalance's picture

equivalent to a Stopler call of EU/USD 1.50!


== It is a SIN to leave the mark with a cent of their money. ==

W. C. Fields

mktsrmanipulated's picture

just another slow algo grind


midgetrannyporn's picture

The pension funds announced just last month that they were suing all the big banks, including the squid, over claims they all misrepresented MF Global exposure to Europe. I'm sure this is nothing like that though. :roll:




alien-IQ's picture

I just can't stop laughing as I watch the /ES rip higher and higher despite the clusterfuck in
Europe. This has gone way past is now officially an absurd comedy.

I Eat Your Dingos's picture

I think I'll purchase Euro bank stocks now....NOT

Mark123's picture

Who cares what Goldman says?  Crooks.


So what has been accomplished in Europe?  They have agreed to give 200 billion to the IMF....other than that nothing other than ruling out printing money through ECB (which is a huge negative for inflation).  Oh, and where is that 200 billion euros coming from?????  What country in the Euro zone has the big fat savings account to tap into??????


Today the robots are buying and selling to each other with an upward bias program switched to "on". 

vote_libertarian_party's picture

I gues when the interest rates in Europe start to rise next week I guess that is when stocks start heading down again?



sabra1's picture

after running a marathon away from euro banks, may  i suggest y'all keep running, 'cause the american banks are right behind!

vote_libertarian_party's picture

So did this 'recommendation' cause the banks to go higher and thus trigger the buy buy buy bots in Europe?

Bob Bercy's picture

Goldman's well connected head of global strategy Peter Oppenheimer has this morning re-upgraded the European Banks sector having downgraded the sector just a week ago  to underperform. What has inspired this remarkable U-turn by the euro-Squid? The pretext is laughably that the (already highly predictable one week ago) ECB liquidity measures  trump the fact that European banks are insolvent by any normal (non-European) stress test measures. The real reason? A wall of highly profitable (for underwriters, not the mugs who subscribe) Euro bank capital raising excercises beckons. Even the shameless squid can't send its salesforce into battle to tout stocks its strategist is telling you will underperform. No doubt Peter's partners observed  the downgrade with horror and he was taken aside and told in no uncertain terms to reverse the move prontissimo. Expect the European bank sector to ramp further on this specious 'liquidity problem solved' rationale into the year end and then be braced to go short in Jan just ahead of the tsunami of Goldman sponsored new bank equity hitting the market. How much will the weary institutions absorb before the sector crashes well below the 2008/9 lows carrying a raft of newly unhappy bank shareholders with it? Maybe the Arabs and the Chinese won't be fooled twice after their 2008 hosing. In my view the Euro bank sector needs at least EUR200bn of new equity capital. Hurry up Banks while stocks of gullable idiots last! First come, first served.

hugovanderbubble's picture

Perfect signal to sell:)

Collapse is imminent's picture

S&P Euro bank cut incoming

surf0766's picture

I better buy them before the cut. Dam.. I am going to miss it if I don't

mtremus's picture

NEUTRAL has and always will be Wall Street speak for SELL

marcusfenix's picture

well, goldman did just acquire the EU so of course they are going to pimp it...

dracos_ghost's picture

Yup, the EU is the new prop trading desk of GS with the FT as their boilerroom division.

Nobody For President's picture

As an aside (well, maybe not):

"I want to emphasize again how important it is to the United States and to countries around the world that Europe succeeds in this effort to build a stronger Europe, and I'm confident they will succeed," Geithner said in France on Wednesday.

Who the hell writes this shit for Timmy? He apparently was able to look the teleprompter right in the eye and say this with a sincere, straight face, so you gotta give him props for acting ability. This makes Pablum (tm) look like hot stuff.

It is also passed off as 'news'.

Theater is one thing, but this is BAD theater.

I may start drinking early today.

ebworthen's picture

A wily technique, using a "survey" to narrow decision making to "GS is better than the alternatives".

slewie the pi-rat's picture

ass-u-me-ing that timmah went X-pond in service to the chairsatan,  wtf did he promise tudoodoo for the euroZombies, both corpo-fascist, and their savoir faire-cist polpuppets running the "sovereigns" into the radioactive arms of the ever-grabbing banksters?  huh?

my goodness, BiCheZ, it could be anything!

howzabout swapping some underwater mortgages?  i'm sorry.  fuk them.  let them guarantee their own!  tranche warfare, right?

cameron got between sarko & angela, and sarko did not like it one bit! 

slewie interpretation:  the (rothschild) banksters have formed the Axis 0f Paper (US-GB-GER) and france will now be controlled from the top => down, but from the outside.  their mission, should they accept it, will be to kiss china's ass and use their money to rebuild libya so china will stfu about surgically detonating various iranian venues.  and also to help fund those in dire and ever-increasing need of euroz

timmah turbo lives up to his name, lining up the paper manufactures for the print-fest of sta-biiil-eee-teee for the banksters' NWO


ebworthen's picture

Translation: "Run like hell from European bank stocks because Goldie Shorts is shorting them!"

slaughterer's picture

It does not fit.  That article is interesting in showing how the Squid's opinion of he summit is the same as German socialists.   Also: read the response. Some of those  who responded to the article must be ZH readers.  

slaughterer's picture

ECB's Noyer is such a cheerleader: someone put him on CNBC with Maria.