2023-07-28 18:15:28
Europe’s banks are crisis-proof. That is the result of this year’s stress tests, which the EU banking regulator EBA and the European Central Bank (ECB) published on Friday evening. This was expected on the market, the European Stoxx bank index temporarily rose by 1.0 percent in advance. According to the ECB, in a crisis, banks’ equity would fall by 4.8 percentage points to 10.4 percent. They would still be adequately capitalized. Capital consumption was lower than in previous stress tests, which supervisors attributed to better earnings. So did Deutsche Bank and Commerzbank, which showed greater resilience.
In the stress tests, the supervisors assumed an intensification of geopolitical tensions accompanied by a resurgence of the corona pandemic in the crisis scenario. It was assumed that economic output in the EU states would collapse by a total of 6 percent in the years 2023 to 2025 and that the unemployment rate would rise by 6.1 percentage points.
70 institutions from the EU were audited, including 57 major banks from the euro area. The ECB supervisors screened another 41 medium-sized banks. No bank failed, but the performance in the stress test does have consequences. Because the ECB supervisors will take the results into account in the annual institution-specific review (SREP) and the respective recommendations for the capital and liquidity base.
If you look at the price development of European bank stocks, they have survived the stress test with the difficulties of American regional banks and the emergency takeover of Credit Suisse by the Swiss competitor UBS. The Stoxx banking index is up 19 percent this year, while the leading index for the euro area, the Euro Stoxx 50, is up 17 percent. The share of the Italian bank Unicredit stands out in both indices. The parent company of Hypo-Vereinsbank leads the list of price winners with a plus of 70 percent.
A comment by Philipp Krohn Published/Updated: , Recommendations: 17 Hanno Mußler Published/Updated: , Recommendations: 2 Hanno Mußler Published/Updated: , Recommendations: 14
The fact that the share has risen so significantly is due to the good earnings situation and the high distributions in the form of dividends and share buybacks. However, these must be coordinated with the supervisors of the ECB. At the end of March, they approved the €3.3 billion share buyback program. Together with the dividend, Unicredit paid out 5.2 billion euros. CEO Andrea Orcel wants to increase this amount to at least 6.5 billion euros for the current year. In the middle of the week he increased the annual forecast for net profit from 6.5 to at least 7.25 billion euros. Since Orcel took office at the beginning of 2021, the Unicredit share price has tripled to EUR 22.50. The analysts expect a further price increase to over 28 euros. Of the 27 analysts on Bloomberg, 25 recommend Unicredit stock as a buy, two as a hold and none as a sell.
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