Poll suggests more bank fundraisings in the pipeline

June 23, 2014 12:01 am

Poll suggests more bank fundraisings in the pipeline

By Sam Fleming

Bankers from dozens of European lenders questioned in an anonymous poll say their firm may need to raise further capital as it seeks to bolster its balance sheet and comply with regulatory demands.

Some 65 banks across the region either expect to raise capital or may need to do so, according to a survey by EY, the accountants. That is out of a total of 294 bankers questioned in interviews conducted during March and April.

Of the number, some 22 bankers were definitive in saying their company had plans to raise more capital.

The poll comes as banks in the euro area undergo an asset quality review and stress test under the auspices of the European Central Bank, which is taking over supervision of major lenders this year.

A number of banks have already taken action to boost their capital levels as they attempt to front-run the exercise, rather than awaiting marching orders when the results come out this autumn, but the results suggest more fundraisings are in the pipeline.

Altogether European banks have raised $35bn of equity this year already, 70 per cent more than in 2013. Some of the capital raisings postdated the EY survey, including an €8bn fundraising by Deutsche Bank announced in May.

In Italy there has been a parade of share sales, including by Banca Monte dei Paschi di Siena and Banca Popolare di Milano.

The European Banking Barometer survey from EY covers banks in 11 markets including Germany, Italy, Spain, the Netherlands, France and the UK. The interviews suggested German banks were most bullish about their prospects, with only 4 per cent expecting to have to raise capital and 2 per cent unable to rule it out.

We have already seen significant pre-emptive capital raising . .  With such a high number of banks considering coming to the market . . . this looks like a wise move

– Steven Lewis, EY

Spanish banks were the least confident – 35 per cent said they expected to raise more capital and 25 per cent were unable to rule it out.

The survey covered institutions controlling at least 50 per cent of banking assets in each market. Some of those questioned were from banks covered by the AQR and stress test, which is putting 130 large lenders under the microscope.

“We have already seen significant pre-emptive capital raising in the market. With such a high number of banks considering coming to the market for more capital in the third and fourth quarters, this looks like a wise move,” said Steven Lewis, lead global banking analyst at EY.

Banks including Santander and Commerzbank were among those with the weaker common equity tier one capital ratios as of the first quarter of 2014 in rankings compiled by analysts at Nomura.


About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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