Narrowing down the list of Europe’s troubled banks
More details and better projections on the European bank stress test and what banks are likely to fail the test.
The smaller than expected demand—just $162 billion–for 3-month loans from the European Central Bank shows, I think, that the European banking sector is in better shape—as I whole—than feared. (For more on why this smaller draw is positive news see my post http://jubakpicks.com/2010/06/30/deja-whew-european-banks-dont-look-quite-so-troubled-this-morning/ )
But the fact that some banks felt the need to grab up roughly $140 billion in six-day money yesterday, July 1, shows that some banks are still having trouble raising money in the financial markets. Analysts estimate that roughly 170 banks in Europe (out of 1,100) are having trouble accessing the markets for capital.
Which banks are still shut out of the financial markets? A big chunk is likely to be Germany’s Landesbanks and Spain’s Cajas. (For more on Germany’s Landesbanks see my post http://jubakpicks.com/2010/07/01/germany-will-stress-test-its-most-troubled-banking-sector-by-mid-month-well-know-how-big-the-problem-at-the-landesbanks-is/ For more on Spain’s cajas see my post http://jubakpicks.com/2010/05/24/worry-over-shaky-euro-banks-pushes-up-interest-rates-threatening-the-global-economic-recovery/ )
And how big are the cash calls likely to be from the banks that fail the stress test?
Estimates now say that about 20 banks will fail the test and will need to raise about $37 billion in additional capital. Public sector banks—that is banks with government ownership stakes such as Germany’s Landesbanks—would account for about two-thirds of the capital that needs to be raised. Private sector banks would account for the other third.
Specific names mentioned by bankers and analysts, the Financial Times reported today, include Italy’s Monte dei Paschi and Banca Popolare di Milano, and Spain’s Banco Popular. Banks and analysts also fingered Greece, Portugal, and Ireland as countries with banks that are likely to need to raise capital.
Public release of stress test results, by the way, have been postponed a week until July 23.
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Jim – Any thoughts on what we should do with the FTR shares issued to VZ shareholders today? FTR is alittle scary – do you think the current 14% dividend yield on those shares is sustainable?
Keep doing what you’re doing and thank you.
Off-topic:
Does anyone have any thoughts on buying gold? I sold my shares of GLD at the recent highs of 120+ but does anyone have any thoughts on gold’s future price direction at this point? (GLD did drop this week a bit).
Jim, Have a nice holiday weekend.
Happy 4th of July Mr. Jubak!
Safe holiday for you and yours!
I have had FTR since just before the crash, and they have continually paid that $0.25 per quarter every time. I don’t have my numbers handy, but I think with the share exchange today [ price drop ] I’m probably 8 -10% down. The shares I got from Vz amount to another dividend.
I too am a little leary and keeping a watchful eye on this company. I used to be a subscriber before I moved away from the area, and it seemed like a pretty well run company. the EPS has always been lower than the div.
Yes, please enjoy your extra day off from all of your financial concentration! Do something out of the ordinary! It helps one become more creative.
CELEBRATE OUR 4TH OF JULY.
“Illinois facing ‘outright disaster’ amid budget crisis”
http://www.msnbc.msn.com/id/38072919/ns/business-the_new_york_times
And this is only the very very veeery tip of the iceberg… How long will it be before the rest of the world starts to see the U.S for what we have become? With states in this kind of trouble, how much job growth do you think this country will see in the future?