The Faro office building at the Santander bank headquarters, Thursday, February 2, 2023.
Bloomberg | Bloomberg | Getty Images
European banks look stronger and more attractive than U.S. banks on many metrics, officials and analysts speaking at the Institute of International Finance conference in Brussels this week said, adding that regulation and cooperation are still needed to promote growth in the region.
The market capitalization of the largest U.S. banks is comparable to that of the top 9 or 10 European banks due to slower growth and Declining profitability Since the 2008 financial crisis, Ana Botín, executive chairman of Spain’s Santander banking group, told CNBC at an event on Tuesday.
However, Europe’s top banks have higher levels of credit default swaps, a form of default insurance for corporate bondholders, “meaning that fixed income investors see our debt as less risky than the best U.S. banks, ’ Botín added.
recent fluctuations lead to sales of credit suisse arrive Swiss bank She said this was not evidence of a systemic banking crisis, but rather mismanagement and liquidity problems at specific banks.
“We are in a very good position in terms of capital, liquidity regulation, customer data protection. But we also need more capacity to support growth so we can be more profitable,” she said.
“What we need is to fundamentally rethink who we want banks to be in the new economy in a world that needs to grow. It’s important to find the balance between prudence and prudence, and we’re not saying we should go back, but we’re also able to finance growth,” Botín continued, adding that this will be a key theme at the IIF meeting.
Davide Serra, chief executive of Algebris Investments, said European banks were “safer, stronger and cheaper” than U.S. banks, highlighting their higher liquidity ratios — around 160% — while the United States is 120%
“U.S. banks have been, to some degree, optimizing their deposit base more. Now the Fed [Federal Reserve] Keep interest rates higher, people just want a return on their savings. So they can choose the money market, or move cash,” he said.
“At the same time, in America, people are being reminded that not all banks are created equal. Just because you have a logo called a bank, you’re not as safe as JPMorgan or JPMorgan Stanley.”
This will lead to further consolidation in the U.S., he said, following the A string of regional bank failures This year, banks are considered safe beneficiaries.
“Overall, I think the opportunity is clear. Europe is more attractive for the strong banks in Europe and the US, with zero deposit outflows, zero issuance…so, honestly, after 10 years and many years restructuring, I think Europe is the ideal place.”
Banking Union Delay
José Manuel Campa, president of the European Banking Authority, pointed to cheap valuations at European lenders, but said their returns were boosted by broader industry turmoil and higher interest rates. Under the circumstances, these valuations have been improving.
“I think with interest rates going up, if [European banks] continue to show that their business model is sustainable, we should also see these valuations improve in the medium term,” he said.
For Campa, any further consolidation of European banking must be about creating better banks and “continuing to foster a more integrated single market in the EU so we can offer European customers cross-border banking and better banking.” Efficient service.”
EU has one long delayed plans to further develop its Banking Union, a set of laws introduced in 2014 to strengthen the banking sector and create a common system In deposit insurance and other areas.Negotiations are also underway Capital Market Union.
Both Botín and Campa said pushing through these tricky negotiations was important for the future of the industry, and Botín said they could help boost growth in Europe.
“One thing we can do in Europe to achieve higher growth is securitization,” she said.
Setting new rules for securitization, the creation of tradable securities from a pool of assets – which remains a contentious subject in the wake of the subprime mortgage crisis – is key to the EU’s proposed capital markets union.
“The securitization market in Europe is 6% of the US market. Banks are no longer the best credit holders,” Botín said.
“In many cases, we can originate, we can help our clients raise capital and then place it in other funds and other better holders. So, for example, there are a lot of things around the capital markets union that can be faster and help achieve higher growth,” Botín said.