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Morning Bid: Swinging between bank fears and rate risks
  + stars: | 2023-03-28 | by ( ) www.reuters.com   time to read: +5 min
A look at the day ahead in U.S. and global markets from Mike DolanMarkets seem caught between the devil and the deep blue sea. Easing concerns about bank stability this week have merely re-introduced interest rate risk, reining in any suggestion of a runaway relief rally as the first quarter closes on Friday. While nerves persist over March bank failures and contagion fears, central banks are still faced with punchy growth and inflation and will likely switch attention back to cooling that down once they're assured banks can take the strain. But interest rate markets are already correcting as signs of stability in the banking arena emerge. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
LONDON, March 28 (Reuters) - Turbulence in Europe's banks following the implosion of 167-year-old Credit Suisse (CSGN.S) and runs on regional banks in the U.S. has focused attention on the role played by credit default swaps in all the turmoil. The moves followed a surge in the cost of insuring Deutsche Bank's debt against default via credit default swaps (CDS) to a more than four-year high last week. Credit default swaps are derivatives that offer insurance against the risk of a bond issuer - such as a company, a bank or a sovereign government - not paying their creditors. The CDS market is worth around $3.8 trillion, according to the International Swaps and Derivatives Association. The CDS market is small relative to equities, foreign exchange or the global bond markets, where there are more than $120 trillion bonds outstanding.
Chair of the ECB Supervisory Board Andrea Enria and Chairperson of the European Banking Authority (EBA) Jose Manuel Campa in the European Parliament on March 21, 2023. And in Switzerland, a non-member of the European Union, authorities had to rescue Credit Suisse by asking UBS to step in with an acquisition. Meanwhile, regulators and officials across the European Union have been nervous about potential contagion to their own banking sector. After all, it's not been that long since European banks were in the depths of the global financial crisis. Like him, an array of officials have made an effort to stress that the European banking system is in much better share compared to 2008.
Bundesbank deputy chief picked for ECB supervision role
  + stars: | 2023-03-10 | by ( ) www.reuters.com   time to read: +1 min
FRANKFURT, March 10 (Reuters) - Bundesbank Vice President Claudia Buch was appointed on Friday to the European Central Bank's Supervisory Board, less than one year before board chair Andrea Enria's term of office expires. The reshuffle at the German central bank comes after Wuermeling decided to leave at the end of the year to take up another job, prompting Bundesbank President Joachim Nagel to assign new board responsibilities effective April 1. The new chair of the Supervisory Board, due to take office in January, is picked by the ECB's 26-member Governing Council and will be formally appointed by the European Union Council following the approval of the European Parliament. Buch, already responsible for financial stability issues, will remain the Bundesbank's vice president. Reporting by Balazs Koranyi; Editing by Alex RichardsonOur Standards: The Thomson Reuters Trust Principles.
[1/2] A view of the Unicredit headquarters of which many employees are working from home due to a coronavirus outbreak, in Milan, Italy March 2, 2020. REUTERS/Yara NardiMILAN, March 10 (Reuters) - Shares in leading Italian banks UniCredit (CRDI.MI) and Intesa Sanpaolo (ISP.MI) fell sharply on Friday following a sell-off in U.S. and Asian banks driven by concerns lenders potentially face losses on their government bond portfolios. The rise in interest rates has hammered the value of those portfolios, with Italian banks seen as particularly exposed given the risk premiums investors demand to hold Italian paper rather than higher-rated German government bonds. By 0820 GMT shares in UniCredit lost 4.5% and Intesa around 4%. Reporting by Valentina Za Editing by Keith WeirOur Standards: The Thomson Reuters Trust Principles.
ECB to test banks for cyber resilience, Enria says
  + stars: | 2023-03-09 | by ( ) www.reuters.com   time to read: +1 min
FRANKFURT, March 9 (Reuters) - The European Central Bank plans to test the cyber resilience of the euro zone's top banks after a sharp rise in cyberattacks, including after Russia's invasion of Ukraine, ECB supervisory chief Andrea Enria told a Lithuanian newspaper. "Next year we are launching a thematic stress test on cyber resilience, which will try to test how banks are able to respond to and recover from a successful cyberattack," Enria told Verslo žinios. "There has been a significant increase in cyberattacks," Enria said. But banks can be cut off from counterparties quickly, including through sanctions, leaving them vulnerable. Results of the test are due around the middle of 2024, Enria said.
[1/4] A Russian police officer stands in front of a branch of the Raiffeisen Bank in Moscow, Russia, February 27, 2016. It made a net profit of roughly 3.8 billion euros last year, thanks in large part to a 2 billion euro plus profit from its Russia business. Of UniCredit's more than 20 billion euro total revenue last year, Russia accounted for more than 1 billion euros. Meanwhile, Russian savers lodged more than 20 billion euros with the bank, which offers a place to deposit funds with fewer sanctions risks. It banned investors from so-called unfriendly countries from selling shares in banks, unless the Russian President grants an exemption.
Euro-banks have done their time in valuation jail
  + stars: | 2023-01-26 | by ( Liam Proud | ) www.reuters.com   time to read: +7 min
Major euro zone and UK banks are trading at a 40% discount to the region’s wider benchmark index, using price to forward earnings multiples tracked by Refinitiv. The subsequent euro zone crisis in 2012 prompted a wave of bad debt that weighed down earnings. More recently, though, euro zone lenders have been facing up to their past sins, and offloading non-performing loans. There’s no evidence of a bank lending splurge, despite years of rock-bottom interest rates. Between November 2012 and November 2022, euro zone banks’ total lending to households and companies grew at an annual clip of under 2%, a fraction of its pre-2008 pace.
Morning Bid: COVID vs RRR
  + stars: | 2022-11-24 | by ( Stella Qiu | ) www.reuters.com   time to read: +2 min
SYDNEY, Nov 24 (Reuters) - A look at the day ahead in European and global markets from Stella Qiu:Another central bank pivots. This has aided the risk-on mood in the market, with Asian shares mostly advancing and U.S. dollar broadly weaker. The minutes of the Fed's November policy meeting showed a "substantial majority" of policymakers reckon it will "likely soon be appropriate" to slow the pace of rate hikes. China's COVID infections hit a record high, with Beijing, which has the strictest rules, failing to contain the spreading virus. "In our view, ending zero COVID as soon as possible is the key to raising credit demand and bolstering growth."
MADRID, Nov 11 (Reuters) - Spanish banks need to preserve capital and keep a lid on mortgage loan costs to cope with a potential deterioration of the economic outlook, the Bank of Spain warned on Friday. The central bank said that risks to financial stability had increased since its last report on the matter in April. Though Spanish banks, including Santander (SAN.MC) and BBVA (BBVA.MC), posted better-than-expected third-quarter earnings but they were overshadowed by higher loan-loss provisions. Spanish lenders have been increasing their shareholder remuneration through higher pay-outs averaging 40%-60%, share buy-backs or a combination of both. Echoing the ECB's non-binding opinion on Spain's banking tax proposal, the Bank of Spain said the levy would hurt banks' profitability and capital generation in 2023-24.
ECB's Enria calls time on era of big bank buybacks
  + stars: | 2022-11-10 | by ( ) www.reuters.com   time to read: +1 min
FRANKFURT, Nov 10 (Reuters) - The European Central Bank's top supervisor Andrea Enria appeared to call time on a season of large share buybacks by banks on Thursday as the economy weakens. Banks including UniCredit (CRDI.MI) and Societe Generale (SOGN.PA) have been reporting bumper profits and announcing dividends and share buybacks, boosted by a sharp increase in interest rates and a trading boom after more than a decade of mostly meagre returns. "Banks have been able to distribute big, until recently we had quite a number of hefty share buybacks," Andrea Enria told an event at the Dutch central bank. Reuters reported on Wednesday supervisors were urging banks to preserve capital in the face of a souring economic outlook after finding they were making overly optimistic assumptions about the economic outlook. This year, the ECB has given the green light to all buybacks that were put up for approval, including from UniCredit, Societe Generale and ING (INGA.AS).
The European Central Bank (ECB), which supervises euro zone banks, believes some lenders have overly optimistic assumptions about the economy, based on models that cannot fully capture the damage from the current bout of inflation, the sources say. Source: S&P Global-EBAMorgan Stanley estimates euro zone banks will pay out 40 billion euros ($40 billion) in 2022 dividends plus an additional 60 billion euros in share buybacks between this year and next - an outsized return by recent standards. "It's not a good idea to pay out capital during a recession," Intesa's Chief Executive Carlo Messina told analysts last week. "With the economy entering recession, the time of massive bank payouts is over," Marco Troiano, a managing director at Scope Ratings, said. "Running down capital cushions would weaken banks."
Morning Bid: Markets primed for gridlock
  + stars: | 2022-11-08 | by ( ) www.reuters.com   time to read: +2 min
A look at the day ahead in European and global markets from Anshuman DagaGrowing expectations of a split government after the U.S. midterm elections are supporting U.S. shares, while Asian markets stubbornly cling onto hopes that China will relax its strict pandemic curbs. Banking stocks could be in focus in Europe on Tuesday after the European Central Bank's top supervisor Andrea Enria said the ECB is carefully scrutinising euro zone banks' payout plans as the outlook for the 19-nation currency bloc's economy weakens. For global markets, the U.S. midterm elections will be the big event to monitor. And analysts say Republicans could also pick up the one seat they need to win control of the Senate. Asian shares ticked higher on Tuesday, encouraged by gains on Wall Street and hopes of China's eventual economic reopening.
Euro banknotes are seen in this illustration taken July 17, 2022. REUTERS/Dado Ruvic/IllustrationFRANKFURT, Oct 12 (Reuters) - While a financial storm gathers nearby, the euro zone has so far been comparatively unscathed. Register now for FREE unlimited access to Reuters.com RegisterHere's a look at four possible flashpoints that are keeping investors and regulators awake at night: property prices, bank loans, government bonds and "shadow banks". REAL TROUBLEThe euro zone enjoyed a real-estate boom until last year, with home prices rising by some 40% since 2015 and commercial real estate prices up 26%. gross debt-to-income ratio for selected euro zone countriesSPREAD TOO THINThe rise in interest rates has raised fresh questions about one of the world's most indebted borrowers: Italy.
Morning Bid: British bond burn
  + stars: | 2022-10-11 | by ( ) www.reuters.com   time to read: +5 min
read moreAhead of the open, 10-year U.S. Treasury yields were again flirting with the year's highs above 4% and global stocks (.MIWD00000PUS) were heading for new 2022 lows. Key developments that should provide more direction to U.S. markets later on Tuesday:* U.S. Sept NFIB small business index. * International Monetary Fund publishes World Economic Outlook and Global Financial Stability Report at annual IMF/World Bank meeting in Washington. * Bank of England Governor Andrew Bailey, BoE deputy governor Jon Cunliffe, Swiss National Bank chief Thomas Jordan, European Central Bank chief economist Philip Lane, ECB board member Fabio Panetta, ECB bank supervisor Andrea Enria speak in United States. Long Gilt Yields SoarRegister now for FREE unlimited access to Reuters.com RegisterBy Mike Dolan, editing by Ed Osmond, <a href="mailto:mike.dolan@thomsonreuters.com" target="_blank">mike.dolan@thomsonreuters.com</a>.
Andrea Enria, chairperson of the European Banking Authority, speaks at Reuters Summit interview in London, Britain, September 25, 2017. REUTERS/Afolabi SotundeFRANKFURT, Sept 19 (Reuters) - The euro zone banking sector is robust ahead of a possible recession but the European Central Bank is still asking lenders to review capital projections given what is likely to be a difficult winter, ECB supervisor Andrea Enria said on Monday. Register now for FREE unlimited access to Reuters.com Register"So, we are asking banks to review their capital projections under severe, adverse scenarios and we will engage in a dialogue with them." "Then there is also the issue of exposures to energy derivatives clearing that we've seen as an issue in the recent times," Enria said. Register now for FREE unlimited access to Reuters.com RegisterReporting by Balazs Koranyi; Editing by Andrew Cawthorne, Kirsten DonovanOur Standards: The Thomson Reuters Trust Principles.
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