By Jesús Aguado and Emma Pinedo
MADRID (Reuters) – The European Central Financial institution’s vp known as on Monday for additional consolidation and value reductions by euro zone banks to enhance battered profitability.
Banks are below stress in Spain and different European nations to consolidate whereas going through rising dangerous loans amid the coronavirus pandemic and low rates of interest.
“Eradicating value excesses, over-capacity is extra mandatory than it was earlier than the pandemic. Consolidation is a device, it’s not a objective in itself, however may be useful in value financial savings, in eradicating over-capacity,” Luis de Guindos instructed a monetary occasion hosted by the newspaper Enlargement and consultants KPMG.
Final month’s deal between Caixabank
to create Spain’s largest home financial institution boosted expectations of a brand new wave of mergers and acquisitions amongst Spanish banks. Their numbers have already fallen to 12 from 55 after the 2008 monetary disaster.
Earlier in October, Spain’s Unicaja
started formal merger negotiations.
Extra flexibility from the ECB concerning capital necessities may pave the way in which for extra consolidation amongst banks in Europe.
Italy’s Intesa Sanpaolo purchased Unione di Banche Italiane
, whereas Spain’s Sabadell
has held casual talks a few potential tie-up, together with with BBVA
, sources instructed Reuters in September.
On Monday, BBVA’s chief government officer, Onur Genç, mentioned the financial institution was open to analysing M&A alternatives each “in Spain and someplace else” in the event that they created shareholder worth, though the financial institution was centered on natural progress.
Santander’s chief government officer, Jose Antonio Alvarez, mentioned on the occasion the financial institution was not contemplating M&A.
Profitability throughout the euro zone’s banks is low and the present financial disaster is anticipated to additional damage prospects.
De Guindos mentioned that euro zone banks’ return on capital (ROE) – a measure of profitability – had declined to round 2% as a consequence of the pandemic, which had led to larger provisions and decrease revenues.
Earlier than the coronavirus hit, ROE within the euro zone stood at 5%, De Guindos mentioned.
He additionally mentioned on Monday that European nations have been reluctant to re-impose the type of strict lockdowns seen on the finish of March. He burdened that any withdrawal of stimulus measures to help European economies needs to be completed step by step and in a calibrated method.
(Reporting by Jesús Aguado and Emma Pinedo; enhancing by Inti Landauro, Ingrid Melander, Larry King)
Copyright 2020 Thomson Reuters.