European banks 'need €240bn a year in fund-raising'
Europe's biggest banks may need to raise €240bn (£211bn) annually for the next three years to fund existing and new businesses, Citigroup analysts have warned.
Telegraph, 22 Feb 2010
The analysts, who include Stefan Nedialkov, said 24 European banks – accounting for almost 70pc of the sector's assets – will face an increased need for funds due to the volatility of the bond markets and new Basel III capital regulations.
The banks issued €56bn of long and medium-term funding in January, but investors' appetite for new issuance has fallen in February as concerns over the state of the European economy has grown.
This means that banks may have to offer a higher yield to attract investors in future. Citigroup estimate that the impact of increased funding costs on banks earnings may reach 10pc in a worst-case scenario.
Nonetheless, the analysts said, funding availability is unlikely to be a major issue for most banks before 2012, and the new stable-funding ratio regulations from Basel only appear onerous for a relatively small number of banks.
The Basel Committee of central bankers and financial supervisors is seeking– through their "Basel III" proposals on the quality of banks' capital – to avoid a repeat of the credit crunch and lessen the industry's cyclical instability.
Belgian banking and insurance group KBC, Franco-Belgian financial services group Dexia and Britain's largest retail banking group Lloyds Banking Group will see the highest impact to normalised earnings and funding needs from higher cost of raising funds and the new regulatory requirements, the analysts said.
The impact will be smaller on Citigroup's key "buy"-rated stocks, which include Spain's second-largest bank BBVA, Greece's largest lender National Bank of Greece, Asia-focused bank Standard Chartered, and Swiss banks Credit Suisse and UBS.
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