Banking outlook in G.E.B. countries

Transcription

1 Banking outlook in G.E.B. countries Presentation by Silvano Galeota, Secretary General, G.E.B. G.E.B. Executive Committee Annual Meeting, Lisbon, June 2017

2 METHODOLOGICAL NOTE THE FOLLOWING SLIDES ARE MAINLY BASED ON THE LATEST EBA AND THE ESRB RISK DASHBOARDS EBA risk dashboard is based on a sample of Risk Indicators (KRI) from 194 European banks (unconsolidated number of banks, including 39 subsidiaries; the list of the banks can be found under the link analysis and data). Underlying data in this risk dashboard has been compiled by the EBA since 2014 and it has served as basis for additional analyses included in EBA's Risk Assessment Report, last version published in December Ratios provided in the text are weighted average if not otherwise stated. The name of the country is only disclosed if the number of reporting institutions is at least three. The data is based on the EBA s implementing technical standards (ITS) on supervisory reporting (EU Regulation No 680/2014 and it subsequent amendments). NOTES The ESRB risk dashboard is a set of quantitative and qualitative indicators of systemic risk in the EU financial system. The composition and the presentation of the ESRB risk dashboard have been reviewed in the first quarter of Unless otherwise indicated, all EU indicators relate to the 28 Member States of the EU (the EU28). In January 2015 Lithuania joined the euro area, bringing the number of euro area countries to 19. Unless otherwise indicated, all data series including observations for 2015 relate to the Euro 19 (i.e. the euro area including Lithuania) for the whole time series. For statistics based on the balance sheet of the MFI sector, as well as statistics on financial markets and interest rates, the series relate to the composition of the EU/euro area in the period covered (changing composition). Statistics based on the balance sheet of the MFI sector are unconsolidated. Source: EBA Banca Sella Holding Research

3 AGENDA Macroeconomic outlook Industry Overview Focus on Profitability Credit Overview

4 GDP growth MACRO OUTLOOK GDP is recovering in Europe but wide differences persist between member States. Source: Eurostat * Index, rebased Q1 2008= 100; data as of 17/05/2017 Banca Sella Holding Research

5 Post crisis recovery MACRO OUTLOOK GDP is recovering in Europe but wide differences persist between member States. Source: Eurostat Banca Sella Holding Research * Index, rebased Q1 2008= 100; data as of 17/05/2017

6 A more homogeneous recovery MACRO OUTLOOK The current recovery is more spread across countries and sectors.. Source: ECB Banca Sella Holding Research

7 A more sustainable recovery MACRO OUTLOOK Compared to previous ones, the current recovery is more sustainable being mainly driven by Consumption and Investments (vs Exports and Inventories). Source: ECB Banca Sella Holding Research

8 Monetary policy (expected) path MACRO OUTLOOK ECB to change its rate guidance at June 8 meeting 2Q Q Q Q Q Q Q Q 2019 ECB to extend QE into 2018 and flag reduction of monthly purchases at Sept.7 meeting ECB to start gradually phasing out QE program over 6 months ECB to raise deposit rate from record-low minus 0,40% Source: Bloomberg Survey of economists conducted April NOTE: Timeline shows dates by when most economist expect a policy action Banca Sella Holding Research

9 Monetary policy paths MACRO OUTLOOK ECB GUIDANCE EXPECTED CHANGES: «We continue to expect them (key ECB interest rates) to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases. Regarding non-standard monetary policy measures, we confirm that our net asset purchases, at the new monthly pace of 60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.» Source: Bloomberg Survey of economists conducted April NOTE: Timeline shows dates by when most economist expect a policy action Banca Sella Holding Research

10 Structural reforms Future growth in EU remains highly dependent on structural reforms which are lagging across the board. MACRO OUTLOOK Source: ECB AR Banca Sella Holding Research

11 Pessimism about Europe France and Italy were very close to UK (as of Sept 2016). MACRO OUTLOOK Source: Eurobarometer Banca Sella Holding Research

12 IMF growth estimates MACRO OUTLOOK GDP growth is expected to stay broadly stable in the Euro Area. Source: IMF * Released in April 2017 Banca Sella Holding Research

13 AGENDA Macroeconomic outlook Industry Overview Focus on Profitability Credit Overview

14 Solvency: CET1 ratio (fully loaded) CET1 levels are comfortably high in all countries. Company specific (transitional) decreases in Italy and Portugal. INDUSTRY OVERVIEW Source: EBA Banca Sella Holding Research

15 Solvency: CET1 fully loaded INDUSTRY OVERVIEW The CET1 ratio generally improved but not for medium size banks. Smaller banks capital keeps piling up. Source: EBA Banca Sella Holding Research

16 Profitability: ROE ROE remains crucially low in several G.E.B. countries. INDUSTRY OVERVIEW Source: EBA Banca Sella Holding Research

17 ECB: key financial risks in EU INDUSTRY OVERVIEW Repricing in f ixed income (trigger: changing expect.in econ.policies) Low bank profitability and adverse f eedbacks with low nominal growth Debt sustainability amid potential repricing in bond market s and political uncertainty in some countries Liquidity risks in non- bank financial Source: ECB Banca Sella Holding Research

18 Profitability: asset quality The NPL (gross) ratio remains too high in Portugal and Italy. INDUSTRY OVERVIEW Source: EBA Banca Sella Holding Research

19 Profitability: asset quality The net NPL ratio remains too high in Portugal and Italy. INDUSTRY OVERVIEW Source: EBA Banca Sella Holding Research

20 Profitability: cost / income The largest banking systems in G.E.B. panel show the lowest efficiency levels. INDUSTRY OVERVIEW Source: EBA Banca Sella Holding Research

21 AGENDA Macroeconomic outlook Industry outlook Focus on Profitability Credit Overview

22 FOCUS ON PROFITABILITY Profitability: BusinessModelAnalysis 2016 vs 2015 Profitability has worsened across the board in EU. Italy and Portugal lead the decrease. Source: Banca Sella Holding Research on EBA data

23 Profitability: BMA / ROE Analysis FOCUS ON PROFITABILITY The RoE is decomposed according to the formula: GROSS MARGIN LEVERAGE COST EFFICIENCY TAX EFFICIENCY NoP TA EbT NoP ROE = x x x TA Equity NoP EbT where NoP: Net Operating Profit (Net Revenues) TA: Total Asset EbT: Earnings Before Taxes Source: Banca Sella Holding Research on EBA data

24 ROE analysis FOCUS ON PROFITABILITY 2016 Gross margins are fairly good in Spain, Italy and Portugal. But the last 2 have problems on costs&provisions. The RoE is decomposed according to the formula: NoP TA EbT NoP ROE = x x x TA Equity NoP EbT where NoP: Net Operating Profit TA: Total Asset EbT: Earnings Before Taxes HIGHER GROSS MARGINS LOWER COSTS AND PROVISIONS LOWER TAX RATES HIGHER GEARING (HIGHER RISK) Source: Banca Sella Holding Research on EBA data

25 FOCUS ON PROFITABILITY ROE analysis 2016 vs 2015 Gross profitability has decreased in all countries (but Finland). Leverage also. The The RoE RoE is is decomposed decomposed according according to the to formula: the formula: NoP TA EbT NoP ROE = x x x TA Equity NoP EbT where NoP: Net Operating Profit TA: Total Asset EbT: Earnings Before Taxes Source: Banca Sella Holding Research on EBA data

26 FOCUS ON PROFITABILITY ROE analysis 2016 vs 2015 NOP (revenues) decreased in all countries. In some countries this was mitigated by a decrease in assets (esp.in Finland). Source: Banca Sella Holding Research on EBA data

27 ROE analysis FOCUS ON PROFITABILITY Where: NII: Net Interest Income NCI: Net Commission Income NTI: Net Trading Income OI: Ot her Income Net Op.Income (NOI) composition 2016 (thicker) and 2015 The main contributors to revenues decreased in all countries. Source: Banca Sella Holding Research on EBA data

28 ROE analysis FOCUS ON PROFITABILITY Costs and provisions determined negative EBT in Italy and Portugal. Source: Banca Sella Holding Research on EBA data

29 ROE analysis FOCUS ON PROFITABILITY Provisions have almost doubled in Portugal and Italy while decreasing in all the other countries. Source: Banca Sella Holding Research on EBA data

30 ROE analysis FOCUS ON PROFITABILITY + COSTS - NOP - COSTS - NOP + COSTS + NOP - COSTS + NOP Costs have generally decreased (except in Italy). The decrease in Portugal and GB was large and comparable to income changes. Source: Banca Sella Holding Research on EBA data

31 AGENDA Macroeconomic outlook Industry outlook Focus on Profitability Credit Overview

32 Credit to GDP ratios CREDIT OVERVIEW According to CRD IV the credit -to-gdp gap should be used as the main indicator to set the countercyclical buf f er rate. It measures the credit cycle on the basis of the deviation of the ratio of total credit to the non- financial privat e sect or to GDP from its long- t erm t rend calculated by the standard methodology recommended by the Basel Committee on Banking Supervision. Recommendation 2014/1 of the European Syst emic Ri sk Board (ESRB) allows the designated aut horit ies of EU countries to adopt credit -to-gdp gap measures ot her than the st andard one where that does not properly ref lect the characteristics of the national financial cycle. The credit to GDP is generally below the long term average and below the 3 years average. Source: EFSB, Banca Sella Holding

33 Growth of loans to households CREDIT OVERVIEW Loan growth is generally picking up (esp.in Italy and France) but remains negative in Spain and Portugal. Source: EFSB, Banca Sella Holding

34 Property prices valuations Spread signals of overvaluation (except Italy), stronger in UK, Germany and France Source: EFSB, Banca Sella Holding

35 Growth of loans to corporations CREDIT OVERVIEW Credit to NFC improves in Belgium, Germany, UK, Italy while decreasing in Finland. Still lagging in Spain and (especially) Portugal Source: EFSB, Banca Sella Holding

36 Net Interest Margin CREDIT OVERVIEW The NIM is very similar across member countries with the exception of Finland and Spain. Source: EBA Banca Sella Holding Research

37 Net Interest Margin and credit risk CREDIT OVERVIEW Higher NIM are usually related to higher credit risk but Italy and Portugal are outliers where credit margins seem too low. Source: Banca Sella Holding Research - EBA data

38 CONCLUSIONS Widespread improvements in macro outlook but structural reforms are still lagging. Low profitability is the main issue in the sector; NPLs legacy and efficiency gains are related to this. Credit conditions are improving with marginal signals of overheating. Margins are low and still decreasing. THANK YOU FOR YOUR TIME

39 Groupement Européen de Banques G.E.B. // 39 The Groupement Européen de Banques is an European Economic Interest Grouping (E.E.I.G.) Estabilished in 1981 "With the aim of developing customer-assistance, observing various markets, seeking advice, examining different initiatives and trends, and acquiring more international know how, a number of banks established a group under the name of G.E.B. (Groupement Européen de Banques). The development of such a group allows the transfer of banking, commercial and EDP information, as well as the exchange of employees for training purposes or reciprocal arrangements for customers, in fact all activities considered of common interest. Current G.E.B. Members are: Ålandsbanken, Finland Member since 2009 Banca March, Spain Member since 2012 Banca Sella, Italy Member since 1981 Bank J.Van Breda & C, Belgium Member since 1999 Bankhaus Lampe, Germany Member since 2000 Banque Martin Maurel, France Member since 1993 C. Hoare & Co., United Kingdom Member since 1996 Banco Finantia, Portugal (not included in this ppt) Member since 2015

40 Contacts G.E.B. // 40 The rotating Presidency of the G.E.B., changing every two years, def ines also t he headquart ers of t he G.E.B.. In June 2017 t he presidency passed t o Bank Van Breda. You may contact the G.E.B. by ing at: info@gebanks.com

41 Disclaimer G.E.B. // 41 For the use of the recipient only. Not to be copied or distributed to any other person. This presentation has been prepared from publicly available information, internally developed data and other sources believed to be reliable. No representation, warranty or undertaking (express of implied) is given and no responsibility is accepted by G.E.B., or by any of its members, employees or agents for the completeness or accuracy of any information contained in, or of any omissions from, this presentation or any supplementary information made available to any interested party or its advisers, and any liability in respect of such information or omissions is hereby expressly disclaimed. This presentation does not constitute an offer, invitation or recommendation to buy, sell, subscribe for or issue any securities or a solicitation of any such offer or invitation and shall not form the basis of a contract with G.E.B.. Opinions expressed herein are subject to change without notice. In providing this presentation, the G.E.B. undertakes no obligation to provide the recipient with access to any further information or to correct any inaccuracies or omissions which may become apparent. The G.E.B., its associated companies and their officers, employees and agents may own or have positions in securities of companies or issuers mentioned herein and may also seek to provide financial advisory, banking and other services for any such companies or issuers.