Latest news with #JohannScholtz
CNBC
06-07-2025
- Business
- CNBC
European banks saw their best first-half since 1997, but maintaining returns will be a challenge
European banks have had a bumper start to the year, outperforming almost all other sectors as investors reward a recent period of improved profitability — but analysts warn returns may not have as far to run in the second half. The Stoxx 600 Banks index has risen more than 28% in the first six months of this year, the strongest performance for the period since 1997, according to FactSet data. Gains have seen several banks hit decade-highs in recent weeks , including Deutsche Bank and the U.K.'s Barclays , after those lenders weathered recent market volatility to deliver strong investment banking returns . In southern Europe, lenders have been riding the high of increased M & A dealmaking, with recovering volumes and a "stabilizing" market in Spain, where the country's largest bank Intesa Sanpaolo flagged a " substantial increase " in such transactions during the second half of last year. Governing the recent landscape have also been cost-cutting and restructuring pushes, with HSBC , Santander , UBS , Societe Generale and Deutsche Bank executing revamps, along with a new focus on structured financial products and trading. European banks have meanwhile significantly boosted their profits over the last three years as central banks dragged interest rates out of a decade of ultra-low territory, a shift that appears to have been belatedly priced in this year — even with rates now falling . "One might argue that investors still didn't fully believe there had been structural change in profitability at European banks, and were concerned about lower rates causing a decline as sharply as it rose," Johann Scholtz, senior equity analyst at Morningstar, told CNBC. "But the guidance that we saw, especially after full-year and first quarter results, pointed to margin expansion at the thin end but also the impact of lower interest rates not filtering in in a full way into profitability," he said. The move out of negative rates in the euro area in 2022 had a greater impact on bank margins than the subsequent moves higher and lower within positive territory, Scholtz continued, with the latter still leaving lenders with room to maneuver via lengthening the duration of their balance sheets and hedging exposures. Many are also now benefiting from action taking during the ultra-low rate period, such as branch closures and increases in their capital under regulatory pressure, he added. M & A boom Among the strongest performers have been France's Societe Generale and Germany's Commerzbank , which have both seen their shares rocket roughly 80% in the year-to-date. As well as delivering sharply higher annual profit last year , Commerzbank has been buoyed by takeover interest from Italy's UniCredit . The sharp increase in its value since then led UniCredit CEO Andrea Orcel to tell CNBC last month that he now sees Commerzbank as too expensive to justify an acquisition, calling any bid "far away." CBK-FF 1Y line Commerzbank share price. Wider merger courtships still abound as cash-flush European banks hunt to achieve the scale of their U.S. peers, driving up the shares of many in the process. Santander this week unexpectedly announced it will acquire British high street lender TSB from Sabadell , while several other bids still hang in the balance. Sabadell itself is trying to shake off the advances of Spanish rival BBVA , and may have received some relief from Madrid's pronouncement that such a merger may only proceed if the two banks do not integrate operations for at least three years. BBVA-ES 1Y line BBVA share price. As well as increasing its Commerzbank stake to a significant 28% , UniCredit has launched an offer for Italian lender Banco BPM , though faces pushback from both the Berlin and Rome administrations. Also in Italy, Monte dei Paschi (MPS) is pursuing a reluctant Mediobanca , with MPS CEO Luigi Lovaglio on Friday saying that securing even just 35% of its takeover target would be enough to control it, according to Reuters. Defense has been one sector to outpace banking gains this year, with the Stoxx Aerospace and Defense total market index soaring nearly 50% this year, against 38% for Stoxx Banks (a wider gauge than the Stoxx 600 banking index). But banks, particularly German lenders, are also benefiting from a defense boom, with the sector set to offer a long-term stream of opportunities. That's amid Europe's 800-billion-euro ($942.6 billion) ReArm drive and the Berlin administration's pivot to relax its fiscal rules, both unveiled in spring. In addition, NATO last week announced intentions to raise individual allies' financial commitments to 5% of their individual gross domestic products by 2035. Second-half concerns Morningstar's Scholtz said that following the strength of first-half gains, he was "starting to view the sector as relatively fully valued." Market sentiment could remain positive, but Scholtz said he struggled to see a catalyst that would significantly boost banking profitability going forward, likely leaving the best-case outcome as stability — and with risks coming from a fall in banks' loan loss provisions or an increase in defaults.
Miami Herald
06-06-2025
- Business
- Miami Herald
Swiss government proposes requiring banks to hold more capital
June 6 (UPI) -- Switzerland's Federal Council Friday submitted new capital requirements for mega-banks like UBS in the wake of the Credit Suisse crisis. It requires UBS to hold $26 billion more in core capital. The Swiss Federal Council said in a statement that a review of the Credit Suisse crisis showed reforms are needed to reduce risks for the state, taxpayers and the economy. "These include stricter capital requirements for systemically important banks with foreign subsidiaries, additional requirements on the recovery and resolution of systemically important banks, the introduction of a senior managers regime for banks and additional powers for the Swiss Financial Market Supervisory Authority (FINMA)," the Federal Council statement said. The council is proposing amendments to the Banking Act in the wake of the Credit Suisse crisis that led to the UBS/CS merger. The Swiss National Bank supported the proposed amendments. "The Swiss National Bank supports the amendments at legislative and ordinance level planned by the Federal Council in the areas of capital and liquidity requirements for systemically important banks, early intervention, and recovery and resolution planning. The measures planned are key to strengthening banks' resilience and their resolvability in a crisis, and thus the stability of the financial system." "The crisis at Credit Suisse highlighted weaknesses in the regulatory framework. The regulatory adjustments now planned constitute a package of measures drawing the right lessons from this crisis." One major concern about UBS is its ability to cope with losses in its foreign units, and that's one of the reasons the Swiss government is increasing capital requirements. FINMA said it also backs the proposed changes ot the Banking Act. "FINMA welcomes the planned introduction of several preventive and disciplinary instruments that will set the right incentives for supervised institutions and thus make a decisive contribution to reducing the likelihood of crises and resolution occurring in the Swiss banking centre." FINMA said in particular, it supports, "the planned new statutory powers for FINMA in the areas of corporate governance, early intervention, recovery and resolution, as well as the introduction of higher capital requirements for systemically important banks with subsidiaries abroad." Morningstar senior equity analyst Johann Scholtz said in a note, "While winding down Credit Suisse's legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands." The new capital rules would require UBS to fully capitalize its foreign branches and do fewer stock buybacks. UBS took over Credit Suisse in 2023, with the government underwriting $10 billion in UBS losses created by the takeover. Copyright 2025 UPI News Corporation. All Rights Reserved.
UPI
06-06-2025
- Business
- UPI
Swiss government proposes requiring banks to hold more capital
Switzerland's Federal Council Friday submitted new capital requirements for mega-banks like UBS in the wake of the Credit Suisse crisis. It requires UBS to hold $26 billion more in core capital. The Swiss National Bank and financial regulator FINMA both backed the proposed capital requirement changes. Photo by Hugo Philpott/UPI | License Photo June 6 (UPI) -- Switzerland's Federal Council Friday submitted new capital requirements for mega-banks like UBS in the wake of the Credit Suisse crisis. It requires UBS to hold $26 billion more in core capital. The Swiss Federal Council said in a statement that a review of the Credit Suisse crisis showed reforms are needed to reduce risks for the state, taxpayers and the economy. "These include stricter capital requirements for systemically important banks with foreign subsidiaries, additional requirements on the recovery and resolution of systemically important banks, the introduction of a senior managers regime for banks and additional powers for the Swiss Financial Market Supervisory Authority (FINMA)," the Federal Council statement said. The council is proposing amendments to the Banking Act in the wake of the Credit Suisse crisis that led to the UBS/CS merger. The Swiss National Bank supported the proposed amendments. "The Swiss National Bank supports the amendments at legislative and ordinance level planned by the Federal Council in the areas of capital and liquidity requirements for systemically important banks, early intervention, and recovery and resolution planning. The measures planned are key to strengthening banks' resilience and their resolvability in a crisis, and thus the stability of the financial system." "The crisis at Credit Suisse highlighted weaknesses in the regulatory framework. The regulatory adjustments now planned constitute a package of measures drawing the right lessons from this crisis." One major concern about UBS is its ability to cope with losses in its foreign units, and that's one of the reasons the Swiss government is increasing capital requirements. FINMA said it also backs the proposed changes ot the Banking Act. "FINMA welcomes the planned introduction of several preventive and disciplinary instruments that will set the right incentives for supervised institutions and thus make a decisive contribution to reducing the likelihood of crises and resolution occurring in the Swiss banking centre." FINMA said in particular, it supports, "the planned new statutory powers for FINMA in the areas of corporate governance, early intervention, recovery and resolution, as well as the introduction of higher capital requirements for systemically important banks with subsidiaries abroad." Morningstar senior equity analyst Johann Scholtz said in a note, "While winding down Credit Suisse's legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands." The new capital rules would require UBS to fully capitalize its foreign branches and do fewer stock buybacks. UBS took over Credit Suisse in 2023, with the government underwriting $10 billion in UBS losses created by the takeover.
CNBC
06-06-2025
- Business
- CNBC
Swiss government proposes tough new capital rules in major blow to UBS
The Swiss government on Friday proposed strict new capital regulations on banking giant UBS following its 2023 takeover of stricken rival Credit Suisse. The measures could mean that UBS will need to hold an additional $26 billion in core capital and carry out fewer share buybacks. "The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion," the government said in a Friday statement, referring to UBS' holding of Additional Tier 1 (AT1) bonds. UBS has been battling the specter of tighter capital rules since acquiring the country's second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse. The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention. Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank's balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not "too big to fail" and that the additional capital requirements — set to drain its cash liquidity — will impact the bank's competitiveness. At the heart of the standoff are pressing concerns over UBS' ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank. Higher capital requirements can whittle down a bank's balance sheet and credit supply by bolstering a lender's funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments. "While winding down Credit Suisse's legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands," Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement. "Such measures may place UBS's capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated." The prospect of stringent Swiss capital rules and UBS' extensive U.S. presence through its core global wealth management division comes as White House trade tariffs already weigh on the bank's fortunes. In a dramatic twist, the bank lost its crown as continental Europe's most valuable lender by market capitalization to Spanish giant Santander in mid-April.
Reuters
17-04-2025
- Business
- Reuters
Regulatory snag in BNP's AXA IM bid may cast doubt on similar deals, sources say
PARIS/LONDON, April 17 (Reuters) - BNP Paribas ( opens new tab embarked on a 5.1 billion euro ($5.8 billion) purchase of an asset management business last year expecting regulators would let it through with minimal impact on the bank's capital, people familiar with the matter said, a model some peers were keen to replicate. But the latest assessment from its chief supervisor, the European Central Bank, tempered those expectations, leading to a greater hit to its capital than the lender had initially priced in, the people said. BNP said on Monday it had lowered its expected returns on the deal following guidance from the ECB on the so-called Danish Compromise - a prudential treatment that allows lower capital requirements for banks that own insurance units. It added that the prudential treatment of the deal will be disclosed at closing, pending final talks with regulators. BNP and the ECB declined to comment. Dealmakers had anticipated a wave of tie-ups after the BNP-AXA deal as European money managers sought to fend off U.S. rivals and demand grows for cheap technology-driven investing. Some analysts had foreseen other banks would follow the French lender's footsteps as a way to boost fees. "It will maybe dampen excitement a little bit," said Johann Scholtz, an analyst at Morningstar. "What makes it a little bit surprising is, in the current environment, you'd expect the ECB to be maybe a little bit more supportive of consolidation across the board." RAISING THE BAR In an interview published on Friday on the ECB's website, Claudia Buch, the central bank's chief supervisor, said the central bank interprets the 'Danish Compromise' as applying to the insurance sector — not to asset management firms. The ECB's decision took some dealmakers by surprise and the lack of clarity around the regulatory treatment may make such transactions more difficult to execute, several said. Some said parties pursuing deals may now seek written assurances from the ECB, effectively raising the bar for such transactions. Not all experts shared that view. "I do not believe that this will materially impact similar activity in the EU," said Alvin Abraham, chief executive of prudential risk consultancy firm Katalysys. The ECB's decision on the use of the Danish Compromise, by limiting the impact on its capital reserves, signals that many of the benefits of the EU provision still apply, Abraham added. Matthew Clark, an analyst at Mediobanca, agreed that BNP's statement on Monday indicated a partial application of the favourable capital treatment. "That very strongly points to the idea that there's been some kind of splitting mechanism used whereby the ECB said: 'you're buying an asset manager where a lot of the business is insurance related, so let's split that kind of notionally in two," Clark said, meaning that the Danish Compromise was applied to the insurance part AXA IM's activities only. The Danish Compromise is a provision that makes it less costly for banks to hold stakes in insurance companies. Instead of subtracting the full value of those holdings from their capital, banks can apply a risk-based calculation. By lowering the capital impact of insurance stakes, the measure encourages banks to own insurers and can reduce the cost of certain acquisitions made through insurance arms. BNP is acquiring AXA IM through its insurance business Cardif. However, following the ECB's comments on the "prudential" treatment of the acquisition of asset management companies, the French lender cut returns guidance to 14% in the third year, from a previously projected 18%, followed by more than 20% in the fourth year, it said in its statement on Monday. BNP's market update follows a similar ECB assessment last month, when the regulator issued a negative opinion on Italian bank Banco BPM's request for favourable capital treatment for its proposed bid for fund manager Anima. BNP Paribas shares have gained about 15% since the AXA IM deal was announced in early August, trailing French rivals Crédit Agricole and Societe Generale, as well as the European banking index (.SX7E), opens new tab, which is up by close to 28% over the same period. ($1 = 0.8814 euros)
