Rising interest rates also have a bad effect on European banks
LONDON/FRANKFURT, 27 January (Reuters) – Rising borrowing costs are giving Europe’s beleaguered banks a long-awaited boost, but they come with a sting in the tail.
Last year USA Federal Reserve and then Europe Central banks ended a decade-low interest rates as the central bank moved toward tightening.
Two of Europe’s biggest corporate and mortgage lenders, Sweden’s SEB and Spain’s Sabadell, recently announced strong earnings for 2022 as the trend helped boost revenues.
But rising interest rates bank good for profits news although, the slowdown of the economy caused by the war and runaway prices news which squeezes borrowers and can create price bubbles, especially in property.
“On the one hand, interest rates are rising, which is good and helps the banks,” said Jerome Legras of Axiom Alternative Investments. “However, the economic outlook is uncertain and credit the risk of losses is high.”
“Investors will pay close attention to what banks say about the future because they want them to keep making payments.”
Europe’s top lenders, including Switzerland’s UBS, Italy’s UniCredit and Dutch bank ING, will reveal how this trend has affected them when they release their 2022 results in the coming days.
The largest in the region where interest rates are rising the fastest in Western Europe credit which is one of the markets Britain it is a country buzzing for the market.
Britain banks have said they expect profits to rise in 2023 despite an uncertain economy – with NatWest, one of its biggest retail lenders, expecting to boost returns on capital, a key measure of profitability.
Another host Britain banks HSBC, Standard Chartered and Barclays announce their results at the end of February.
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According to business recovery firm Begbies Traynor Group, there were 23,885 claims against UK businesses that owed money in the last quarter of 2022. court decision, a more than half year-on-year increase and a sign of growing distress among small firms.
“It’s a bit of a paradox for banks because … they serve customers who are struggling every day,” he said at Accenture bank strategy consultant Tom Merry.
The UK property market is also reeling. House in the fourth quarter of last year prices It fell 2.5%, the biggest three-month decline since the financial crisis.
Past Prime Minister After the market chaos triggered by Liz Truss’ September tax cut plans, lenders withdrew around 1,700 mortgage products in a week and re-introduced them at rates 1-2 percentage points higher. This will hurt borrowers.
CBRE’s Monthly Index slipped more than 13% on average in 2022, with commercial real estate values falling, such as offices.
Investor confusion and attempts to cash out have forced BlackRock, M&G and others to halt some property fund withdrawals. About 15 billion sterling assets are in an unknown state.
Jackie Bowie of risk management Chatham Financial said banks were forced to put more money into big-ticket property investments.
A similar situation is emerging in Germany. Its biggest creditor is Deutsche Bankis profiting from rising rates and is expected to have its longest consecutive quarter of gains in at least a decade.
Analysts expect the biggest gains from its corporate and retail divisions, which have benefited from higher rates, although revenues from its global investment bank will fall from the drop in the deal.
But threats remain. Europe Analyzing more than 1.3 trillion euros of commercial property lending in the Union Europe Banks in Germany and Austria have been particularly active in commercial property, according to the Banking Authority.
Germany’s financial regulator BaFin recently warned that a rapid rise in interest rates could weigh on some banks and lead to loan losses.
Closing contracts will also not save banks, as large corporate financial transactions such as acquisitions or stock market listings. This led to a series of layoffs on Wall Street.
Additional by Iain Withers, Sinead Cruise, Stefania Spezzati and David Milliken in London, Tom Sims, Balazs Koranyi and Marta Orozs in Frankfurt and Berlin, Jesus Aguado in Madrid and Niklas Pollard in Stockholm report; Written by John O’Donnell; Edited by Jan Harvey
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Tom Sims
2023-01-27 11:14:59
Source – reuters
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