The selector angle
Selectors across Europe have echoed the expectations of those managers who think no great surprises will come with the results and that it will instead help improve harmonisation and transparency of the banking system.
Juan Hernando, investment analyst at Spain’s Inversis Banco, for instance, does not expect the AQR results to have a negative impact on his company’s investment decisions.
“An exigent or restrictive AQR would not help to increase the capacity of the banks to lend that is the final aim of European policies these days. If eventually AQR added some volatility or damaged the performance of the financial sector in the short term, it should benefit from measures like the acquisitions of asset backed securities by the ECB or the implementation of the European QE,” he says.
However, he believes the result of the AQR could be a wake-up call for some institutions.
“Perhaps some banks will need a capital increase, but we do not think that it will have an important significance in the long term for the market and the positive effect of the ECB measures will overlap the AQR.”
Carsten Mumm (pictured), head of Asset Management at Donner & Reuschel agrees.
“It is likely that some banks will have to improve their capital base as a result of the AQR and the stress tests. We assume that particularly banks in peripheral countries will be affected, since they have a relatively higher share of NPL’s. Especially Greek banks have a larger share of questionable cross-border debt from other peripheral states. But even bigger banks, possible also in Germany could be affected,” he says.
Looking at potential effects of the AQR on the real economy, Giuliano Anselmo, third party fund analyst at Fondaco, says that it is now a widespread opinion that many banks are waiting for the AQR outcome before engaging more heavily in the December T-LTRO (targeted longer term refinancing operations): “This would of course have a positive impact on the real economy, especially for SMEs’ access to credit. Another consequence for peripheral banks could be an acceleration in the aggregation process, in particular for smaller banks.”
Sell off threat
But, could it be possible that the AQR results push banks to sell off their asset management arms? Marco Pisano, investment manager at Italy’s CFO Sim does not think that is going to be the case. “I believe that positive results from the ECB Comprehensive Assessment will act as a catalyst for banks to develop their asset management activities. That is what has recently happened for instance with the UniCredit/Santander deal. I believe we will see a rise in the M&A activities in Europe next year,” he says.
An equally positive mood emerged from Unicaja Banco Group’s Rafael Romero and AtlCapital’s Felix Lopez. Rafael Romero, chief investment officer at Unicorp Patrimonio (Unicaja Banco Group), says they are positive about the AQR results.
“We hope the AQR results will help dissolve doubts on the financial industry’s stability. From a macro point of view, we expect the bank to reduce its government debt holdings,” he says.
Felix Lopez, CIO at AtlCapital, agrees: “We expect positive results from the AQR. From our point of view, we remain overweight in the European banking sector through our exposure in Spanish banks, which we believe could be the best positioned if it all goes as we predicted.”
|According to the results of a poll that ran on www.investmenteurope.net in the weeks leading up to mid October, the outcome of the AQR will affect the investment decisions of fund selectors across Europe.The poll asked the following question: “Will the ECB’s AQR impact your investment decisions?”Respondents answered:|
|Impact of AQR on regulators|
|The importance of the Asset Quality Review should not be underestimated from the perspective of national regulators, which will be tasked with handling any market or policymaker reaction to the review of their domestic banks.The Financial Supervisory Authority in Finland said in a note published on its website earlier this year in regards to developments around so called Common Reporting (COREP) requirements demanded by CRD IV that “accounting of banks’ balance sheets (Asset Quality Review) is tying up the Supervisory Authority’s resources to the degree that it is unable to provide any education on COREP reporting.”Sweden’s Financial Supervisory Authority announced in the week of 22 October that its press team was on standby to answer questions starting from midday on Sunday, 26 October, when the results of stress tests of the bigger banks in the country were scheduled to be published alongside the results of the AQR. The key banks affected include Handelsbanken, Nordea, SEB and Swedbank.And the ECB itself felt compelled to publish a video on YouTube (https://www.youtube.com/watch?v=uEGccQpPKqI) explaining the template used to publish the results of the Comprehensive Assessment of individual banks.|