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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.

 

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About bambooinnovator
KB Kee is the Managing Editor of the Moat Report Asia (www.moatreport.com), a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia; subscribers from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing. KB has been rooted in the principles of value investing for over a decade as an analyst in Asian capital markets. He was head of research and fund manager at a Singapore-based value investment firm. As a member of the investment committee, he helped the firm’s Asia-focused equity funds significantly outperform the benchmark index. He was previously the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB has trained CEOs, entrepreneurs, CFOs, management executives in business strategy, value investing, macroeconomic and industry trends, and detecting accounting frauds in Singapore, HK and China. KB was a faculty (accounting) at SMU teaching accounting courses. KB is currently the Chief Investment Officer at an ASX-listed investment holdings company since September 2015, helping to manage the listed Asian equities investments in the Hidden Champions Fund. Disclaimer: This article is for discussion purposes only and does not constitute an offer, recommendation or solicitation to buy or sell any investments, securities, futures or options. All articles in the website reflect the personal opinions of the writer.

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