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LONDON (Reuters) – Britain's Barclays (BARC.L) and Lloyds (LLOY.L) were latecomers of the European Union's health check on Friday, alongside Banco BPM (BAMI.MI), one of the Italian banks that were expected difficulties.
The EU banking policeman has published the results of 48 banks on
Friday, his toughest "stress test" since 2009, when he began the exercise of identifying capital breaches and avoiding any repetition of government bailouts triggered by the financial crisis of 2008.
Although there is no success or failure, the banks are not able to carry out the most unfavorable or difficult part of the test of the European Banking Authority (EBA) without preserving a ratio of funds more than 5.5%. have to raise more capital or sell risky assets.
None of the people tested dropped below 5.5%, but Barclays ended up with 6.37% and Lloyds with 6.8%, both down because of their exposure to credit other than secured loans like mortgage loans, said the EBA.
Barclays said in response to the results that he remained comfortable with a target target capital ratio of about 13%. Lloyds has stated that its capital levels remain solid and that it should continue to generate 2 percentage points of additional capital for the entire year.
Italian banks were expected to suffer from the decline in the value of the government bonds they hold and the time it took to recover from the economic crisis. The capital of Banco BPM was 6.67%, while that of UBI (UBI.MI) was 7.46 percent.
The largest German lender, Deutsche Bank (DBKGn.DE) posted a ratio of 8.1%, the second worst German score in front of the public bank NordLB but against 7.8% the last time it was examined under the microscope two years ago.
LOAN WARNINGS
British banks have chased riskier companies to improve their yields, while extremely low interest rates and competition from the most recent rivals have fueled a boom in consumer lending.
This prompted repeated warnings from the Bank of England urging them to take a more cautious approach. The IMF said in September that consumer credit in Britain is growing much faster than income and may require "additional increases in bank-specific capital reserves".
The Bank of England, which will release its own stress test results next month, said Friday that UK banks have shown they can absorb the worst-case scenario of the EBA.
ABE said that of the 48 banks tested, the unfavorable scenario reduced the core capital ratio by 395 basis points when all new and planned capital rules were applied, which is higher than the test. prior to 2016 due to credit losses.
"The result (…) shows that banks' efforts to strengthen their equity in recent years have helped to strengthen their resilience and ability to cope with the severe shocks and material impacts of the 2018 financial year. about capital, "said Mario Quagliariello, director of economic analysis. at the EBA, said.
Supervisors will use the test results to determine the capital banks should hold or what assets should be sold.
The latest EBA test gauged the ability of banks to withstand theoretical market shocks, such as rising political uncertainty amid falling economic growth, a messy Brexit or a massive selloff of bonds and real estate .
European banks are lagging behind their US counterparts in terms of profitability, loan quality and cost discipline, and the region's banking index, the SX7P, has lost more than 20% this year.
Thirty-three of the banks tested are in the euro area, with the main supervisory authority being the European Central Bank (ECB), which tests 60 other smaller banks separately. Some of them are struggling, but their results will not be published.
Report by Huw Jones and Lawrence White; Written by Alexander Smith; Edited by Jane Merriman
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