Faced with structural difficulties even before the onslaught of the coronavirus, the banking sector has escaped the worst thanks to the spectacular measures deployed by central banks and governments to support credit, it is said at Allianz Global Investors.
Confronted both with the tightening of their margins in a universe of low interest rates, with increasing equity capital requirements in the face of tightening regulations and rising IT costs, European banks have suffered the full brunt of the effects of the health crisis.
The sector’s Stoxx index has lost nearly 30% since the start of the year.
If the banks suffered on the equity market as on the bonds, the fears weighing on the credit segment were quickly assuaged, explains Simon Outin, analyst and credit manager specializing in the European banking sector for Allianz GI.
“We had very strong concerns about bank credit during the crisis but we were quickly reassured,” he told Reuters.
“We have seen that the support plans, such as support measures for individuals through short-time working and other mechanisms, as well as loans guaranteed by the State have meant that the level of losses observed by the banks has been very content compared to what the historical correlation with GDP would have indicated, “he argues.
If an analyst had modeled the contraction of 7% to 8% of the gross domestic product of the euro zone expected for this year, he would have concluded the bankruptcy of a good part of the sector because of non-absorbable losses, continues the manager.
CONCERNS COULD RETURN
However “there is no bank, for the moment, which is in a situation of near bankruptcy, even the smallest Spanish banks, even the Portuguese. And it is thanks to the support plans of the governments and to the money. central banks. With markets that were also there to lend, we resisted something that was historically important. ”
At the heart of the turmoil during the 2008-2009 financial crisis, banks were much better equipped to cope with the shock caused by the coronavirus pandemic, in particular because of the strengthening of their own funds imposed by regulators.
They then benefited from the impressive arsenal of monetary and budgetary measures deployed to contain the cost of credit, which does not mean that the end of the tunnel is in sight for the sector, continues Simon Outin.
“We are in a sector which was structurally unprofitable before the crisis, and have been added credit loss problems which bring profitability to a level close to zero, with increasingly low rates and prospects of a return better luck even worse, “he said.
Concerns for the banks could return if the uncertainties about the evolution of the health crisis continued and if the support measures were reduced, warns Simon Outin, who however believes that central banks and governments should remain accommodating for a long time.