silicon valley bank svb getty stock 588788

Analysts are calm about European banks

In this morning’s trading, bank securities on the European stock exchanges suffered a drop not seen in more than a year due to worrying news coming from American banks. Bar analysts of most major banks do not draw parallels between the failed California bank and European banksJP Morgan says the industry will face increased scrutiny from both investors and regulators.

According to Deutsche Bank and Citigoup analysts, European lenders have more diversified sources of liquid funding, are able to collect deposits and have larger financial reserves than their American sector counterparts. Citi analysts say they are “not aware” of any European bank that relies as much on a small group of large depositors as SVB, and whose customer base would include so many technology and health startups. The fact that banks have to book losses from the sale of securities means less risk for capital, since European lenders must have more high-quality liquid assets. European banks hold cash and government bonds, but the proportion of securities in their portfolios is much smaller, they add.

The Jefferies analyst highlighted the unique nature of SVB’s business activities, but drew attention to the expected unrealized losses in the banks’ portfolios. European bank stocks have benefited in recent months as rising interest rates boosted bank earnings, allowing them to pay higher dividends and buy back their own shares. However, the collapse of the Californian bank made it clear that banks may have bonds that cannot be sold without losses.

European lenders hold most bond portfolios until maturity and are thus not exposed to interest rate risk, reassures the Deutsche Bank analyst. But the losses recorded on paper can become capital losses if they have to be sold – the German financial regulatory authority, BaFin, warned in January about the potential losses of smaller banks.

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