The ECB bank stress test results are in and I thought I would give you my take.
So unfortunately it looks like I could be losing a bet about a regional bank going down because of this as the results are pretty much as everyone expected.
The shortfall gap isn’t much and of the headline 25 banks who have failed, actually 12 have already raised enough capital and you can ignore the Greek banks as they have a special recovery plan from the Greek turmoil. This leaves 11 banks.
The total amount they need to raise is pretty small.
The main culprit out of those remaining banks is Italy, no real surprise there. Although the Italian central bank is now suggesting only two of those banks actually still need to raise capital
Chances are most of the shortfall can be raised in private placements (i.e. shareholders).
I think interestingly are some of the side comments that should appear out of this, potentially a lot of the world still seems to be kidding itself about how bad things could get to ensure the right messages are played. That’s quite a skeptical view and one we are unlikely to see the market take an awful lot of notice on.
“The ECB also decided banks had been too generous in deciding which of their loans should be classified as bad, identifying an extra €136bn in non-performing exposures.”
So sum total, this was possibly the worst kept secret ever with results coming in as expected with no real shocks.
Looks like I need to pay up on my bet!
If you want the slides from the ECB presentation they are here