European banks will be in the spotlight this week as earnings season begins, but heavy losses across sectors on Friday appear to be transmitting credit concerns across the Atlantic at a particularly difficult time for the region’s financial institutions.
Credit worries hit European banks
Last week, some of the biggest names in American finance competed to make some of the most disturbing statements of the week. The candidates are JPMorgan CEO Jamie Dimon, Citigroup CEO Jane Fraser, and Apollo President Marc Rowan.
Mr. Dimon began this week with a stark warning about the private credit market: “If you see one cockroach, there’s probably more.”
Fraser then appeared, warning of “valuation frothiness”. Mr Rowan, meanwhile, hinted more bluntly in a recent appearance on the Financial Times that he was “willing to cut corners”.
As sirens blare across America, what does this mean for Europe and how will bankers across the continent voice their concerns as earnings season begins in earnest next week?
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European financial results season begins
UniCredit, barclays, Lloyds Banking Group and natwest Be at the forefront of financial name reports in Europe and the UK
Filippo Alloatti, head of credit and finance at Federated Hermès, told CNBC he expected CEOs to “shift the focus from macro to micro risks” in this week’s earnings conference amid concerns over private credit markets. Meanwhile, Morningstar’s Johan Scholz told CNBC that while he didn’t see any material deterioration in credit quality in the third-quarter results, “it will be interesting to see how candidly management will be when discussing the future evolution of credit quality.”
Highlighting concerns about the loan books of corporations and small and medium-sized enterprises, Scholz said: “The market is underestimating the impact that (trade) tariffs could have on some parts of European banks’ loan books.”
Credit worries led to a sharp decline in bank stocks across Europe on Friday. deutsche bank, société generale, UBS and peers across sectors.
margin of error
CNBC’s Sylvia Amaro will speak with UniCredit CEO Andrea Orcel on the sidelines of UniCredit’s latest results, with S&P Global expecting a weak third quarter due to narrower net interest margins and higher funding costs.
The Italian lender continues its M&A ambitions, increasing its stake in Greece’s Alfa Bank to 26%, and Orcel said: “We are grateful to the Greek government, central bank and other Greek institutions for welcoming us and encouraging us to invest.” Reaction to UniCredit’s expansion plans in Germany remains muted.
January 22, 2022, UniCredit SpA headquarters in Milan, Italy.
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car trouble
British lender Lloyds Bank is also due to report next week, having just announced a new £1.95bn hit to its balance sheet following a regulator’s ruling into misselling car finance loans. The Financial Conduct Authority estimates that the scandal could cost UK financial institutions up to £11 billion. IG expects this charge to offset a strong quarter for the bank, as net interest income continues to grow, unlike its European peers.
Lloyds Banking Group said it would prevent people from buying cryptocurrencies using credit cards.
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This week’s economic data and earnings:
Monday: China GDP data
Tuesday: L’Oréal, Coca-Cola and Netflix earnings.
Wednesday: UK inflation data, UniCredit, Barclays, Tesla earnings
Thursday: Unilever, Lloyds Banking Group, SAP, Intel earnings.
Friday: France, Germany, UK PMI data, NatWest, Procter & Gamble earnings
