Travis Perkins and Polymetal to lose out in FTSE 100 reshuffle

Builders’ merchant Travis Perkins and mining company Polymetal face relegation from the FTSE 100 after their recent performances were hit by political events. The share price of Travis Perkins has dropped 29 per cent since the UK voted to leave the EU in June, as economic uncertainty has sparked concerns among some investors about the […]

Continue Reading


Eurozone inflation climbs to highest since April 2014

A welcome dose of good news before next week’s big European Central Bank meeting. Year on year inflation in the eurozone has climbed to its best rate since April 2014 this month, accelerating to 0.6 per cent from 0.5 per cent on the back of the rising cost of services and the fading effect of […]

Continue Reading


Wealth manager Brewin Dolphin hit by restructuring costs

Profits at wealth manager Brewin Dolphin were hit by restructuring costs as the company continued to shift its focus towards portfolio management. The FTSE 250 company reported pre-tax profits of £50.1m in the year to September 30, down 17.9 per cent from £61m the previous year. Finance director Andrew Westenberger said its 2015 figure was […]

Continue Reading

Capital Markets, Financial

BGC Partners eyes new platform to trade US Treasuries

BGC Partners plans to launch a new platform to trade US Treasuries early next year, in a bid to return to a market in the middle of evolution, according to people familiar with the plans.  The company, spun out of Howard Lutnick’s Cantor Fitzgerald in 2004, sold eSpeed, the second-largest interdealer platform for trading Treasuries, […]

Continue Reading


RBS share drop accelerates on stress test flop

Stressed. Shares in Royal Bank of Scotland have accelerated their losses this morning, falling over 4.5 per cent after the state-backed lender came in bottom of the heap in the Bank of England’s latest stress tests. RBS failed the toughest ever stress tests carried out by the BoE, with results this morning showing the lender’s […]

Continue Reading

Categorized | Banks

Spain stress tests fail to dispel clouds

Posted on September 30, 2012


Is it enough? That was the question on the lips of Spanish bank watchers over the weekend, following news on Friday that the sector would need as much as €59.3bn of new capital.

A detailed examination of the loan books of 14 banks showed that seven did not have enough capital. The biggest shortfalls were at Bankia, the agglomeration of former savings banks whose problems triggered this year’s nervousness across the banking sector, which was deemed to need nearly €25bn, up from the €19bn capital gap identified only a few months ago. But Banco Popular, another listed bank that is Spain’s sixth biggest lender, was told it would need to raise €3.2bn of fresh capital. While Bankia’s money was always going to have to come from European rescue funds, Popular insisted on Friday that it would raise its capital needs under its own steam.

    Spain capital needs graphicClick to enlarge

    Madrid hopes the detailed “bottom-up” review of 115,000 loans, conducted by Oliver Wyman with close international supervision from authorities including the International Monetary Fund and the European Central Bank, will dispel investor doubts over the true extent of losses in the sector. Overall, the total shortfall drops to €53.7bn after including deferred tax assets and ongoing mergers, according to the report.

    Some Spanish bankers have been critical of the process, none more so than Angel Ron, executive chairman of Banco Popular, the largest non-nationalised lender to fail the test, attacking the process for “weakening” banks and adding “confusion”.

    “It is like taking a very aggressive medicine before having the disease,” Mr Ron said before the results were released. Immediately after results showed the bank had a €3.2bn capital shortfall under an “adverse” scenario, it said it would not need any state aid.

    Analysts however argue that with the bank having suffered a sharp fall in its share price, and the equity capital markets all but closed to most lenders, it will be a gruelling process for Banco Popular to sell new shares, and possibly highly dilutive for existing investors.

    The majority of Spanish bankers have been generally supportive of the stress tests, arguing that their rigour and the level of international supervision marked a decisive step in restoring international confidence in the country’s financial sector. “These are the most demanding tests ever in Europe,” said Francisco González, executive chairman of BBVA, Spain’s second largest bank by assets. “It is a very important step to restore confidence in the Spanish financial system”.There remains some scepticism, however. Analysts at Nomura, for example, question why the stress scenarios for property market slump is a third less extreme than in Ireland.

    Those involved in the tests argue that Spain’s crisis is more advanced than it was in Ireland when an equivalent process took place there two years ago, meaning that more of the drop in property values is already baked into asset prices.

    About 11 per cent of the total credit assets of the 14 institutions were individually examined by Oliver Wyman and the Big Four auditors, with about 30 per cent of the €300bn of developer loans owned by Spanish banks scrutinised.

    This saw 115,000 individual loans picked at random and individually examined by a team of 450 auditors over three months, or about three loans per auditor each day.

    In several cases loans were made to the same client, people involved in the tests said, meaning that the workload would have been reduced.

    Despite the depth of analysis on the loan book, critics also attacked the narrow focus of the exercise, echoing criticisms of last year’s Europe-wide stress test of eurozone sovereign debt, which failed to extrapolate the risk of a sovereign default to other related risks such as funding costs.

    In the Spanish test, one area of similar omission was banks’ equity stakes in other companies. While it was already known that the process would not focus on this area, analysts and investors question the wisdom of such a blinkered approach.

    La Caixa, the Catalan savings bank listed as Caixabank, controls large chunks of the utility Gas Natural, the oil company Repsol and smaller stakes in Telefonica and other companies, with the dividends from these holdings representing an important part of its cash flow.

    “This is completely inconsistent, because one of the components of the adverse macro scenario is a higher than 50 per cent fall in the stock market in Spain,” said one fund manager. “How on earth would you avoid taking provisions on your equity portfolio?”.

    Investors will be watching closely to see how the Spanish authorities and the banks with shortfalls manage the recapitalisation process in collaboration with their European partners. But with scepticism already widespread, analysts see little chance of a swift dispersion of the clouds hanging over Spain’s banks.