Stress tests fuck under the Bags stress. After an excellent July (Milan Stock + 4%, European stock markets + 2.5%) in August starts immediately with the negative sign. With banks again under pressure following the publication of the stress tests. The sub-index of European industry sold 1.8% (-2.5% Deutsche Bank, Societe Generale down 3.6%), the Italian did even worse (-4.9%) dragging the Ftse Mib down worst in Europe (-1.7% against an average of -0.8%). It must be said that initially the stock had opened up sharply, dragged by their banks. But shortly after they reversed course.
Ironically the only bank that closed higher (+ 0.58% but was near came to + 10%) was the one that is worse output, with a rejection if the adverse scenario, by the stress tests of the European banking authority and communicated with the markets closed Friday evening. The worst is however found to UniCredit (-9.4%) and by the European simulations was the fourth from bottom as resilience to the worst case scenario suggested by the EBA.
How do you explain the different performance? As the Institute of Siena, the markets have already priced in the rejection. What they were serving not quite had the OK from the ECB to the plan presented by the institute to get back on security: capital increase of 5 billion and the sale of non-performing loans accounting for 27.7 billion with the aim of obtaining 9.2 billion (then valued at 33% of the gross price, a much higher benchmark compared with 18% who were sold to Banca Etruria suffering, CariChieti, Cariferrara and Banca Marche, the four institutes saved last December, before the entry into force of the bail-in). So with the rise yesterday, the market confirmed the appreciation of the plan. Although some doubt on the ability to raise 5 billion, not excluding the possibility of an unsubscribed share despite a pool of eight banks have “pre-guaranteed” the operation.
As for UniCredit the market suffered an increase from 5 billion but after the stress tests can not exclude that it is necessary something more. The field then weighs the hypothesis that could be propagated to other banks some requests approved in the plan-saving MPS by the ECB. “After the plan presented Friday, Mps raises the level of coverage for impaired loans at 40%, above the level of the Italian banks, which stood just above the 20% – says a manager – if 40% become a benchmark, a number of institutions should make new allocations. ”
We must not forget the effect of profit-taking in the classic atmosphere “buy on rumor and sell on news”. In July, the European banks were up 6% and Italian 12% going to have to serve a generalized passing the EBA tests. The view volatility yesterday, however, does not pave the way for an entirely relaxing flight in August. First, because at this point – net of stress tests (by many analysts considered too bland as the worst case scenario did not include sovereign default) – the theme of the banks’ vulnerability remains open. The second possible outbreak of turbulence comes from oil. Yesterday crude oil broke down the psychological threshold of $ 40 a barrel for the first time since last April. In one month, the black gold has lost 18% and at this point there are those who assume that it is more than a mere correction. Also because the drop is attributed to weak demand, which could have an impact on the global growth expectations. In all this, Goldman Sachs predicts a -10% on Wall Street – which recently updated historical highs – and the Stoxx Europe 600 in three months. It will be quiet summer?
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