... Hi Esh, Great work this thread yourself & others, wish I had the skills to contribute a little more...
...UK may be in for a bumpy ride in the months ahead, yet FTSE 100 was EU’s least worst performing market on such an memorable day, suggests perhaps that Europe’s biggest risks lie elsewhere. Possibly in Euroland's southern flank? Former FED head Greenspan conceded today, "...that the euro is failing....”:
'It is a very serious problem in that the southern part of the euro zone is being funded by the northern part and the European Central Bank.'
...A serious problem (on which Greenspan was less than forthcoming) is Europe’s swelling ranks of heavy leveraged, poorly capitalized, bad-loan bedeviled, banks. It was their stocks that plunged the most. Despite that CB heads' led by BoE Carney, ECB Draghi & FED Yellen, pledging to print countless billions of pounds, euros & dollars in any last-ditch attempt to backstop Europe’s crumbling financial system, the EU Stoxx 600 Banking index plummeted 14.5%. By far the worst of the fallout hit Italy & Spain where the banks saw their MCaps decimated by around a fifth. Italy’s biggest banks, most of which are filled to the gills with slowly putrefying NPLs, it was their worst day in what is proving to be their worst year, ever...
...Italy’s biggest bank (and a global systemically important institution?), Unicredit, slid more than 23% on Friday, down 59% since January. Banco Populare, the fifth biggest bank, also lost 23% on Friday, down over 80% this year. Fourth biggest, the perpetually failing Banca Monte dei Paschi di Siena (whose loss-making derivatives bets were mad under Draghi’s watch as Bank of Italy’s governor), fell by 16.5%...
...Spain hit new yearly lows as €23 billion was wiped off their combined MC, the worst rout the sector had ever experienced. Bankia lost 20% share value, as did too-big-to-fail Santander and Sabadell, two of the four European banks by JPM's analysts as the most exposed to a Brexit fallout. Spain’s other biggest banks — BBVA, Caixabank, Popular — weren’t far behind despite their lesser exposure to the UK market.
Santander & Sabadell have a major presence in the UK. Close to a third of Santander’s operations are in the UK while for Sabadell, (5th sized), just over 20% exposure thanks to its 2015 purchase of UK-based TSB. This is also one of the biggest sources of both banks’ operating profits, should the sterling continue to fall & UK enters into recession, those profits could be decimated. For Santander (Spains no. 1), timing could not have been worse, profits from its other key international market, Brazil, are also regressing at an alarming rate...
...Surely, many banks in the Eurozone’s third & fourth largest economies are going to need some serious resuscitation in the months ahead. Maybe the ECB is hardly likely to let such a godsend crisis go to waste?... Perhaps utilise the resulting chaos as cover for stealth bailouts of Italian and Spanish banks, which altogether are already scoffing up more than half of the funds the ECB provides in its regular refinancing operations. Bloomberg today reported they are also by far the biggest participants in the ECB’s latest new loan program, TLTRO II:
"UniCredit’s total borrowing in Friday’s auction amounted to 26.6 billion euros including 18.2 billion related to Italy, while Intesa took 36 billion euros. BBVA borrowed 24 billion euros. Banca Monte Paschi di Siena SpA, Unione di Banche Italiane SpA and Banca Popolare dell’Emilia Romagna SC also increased their net borrowings, while Banco Popolare SC, Bankia SA, Banco de Sabadell SA and Banco Popular Espanol SA rolled over previous loans into a new program…"
....However much money the ECB will conjure out of nothing in the coming days (under the label 'warding off Brexit induced' chaos?), it still may well prove not to be enough to undo the massive problems plaguing the Eurozone’s banking system...
...Not to forget, of course, Deusche B also has gargantuan derivative exposure in the above Countries Banking systems, so perhaps regardless of any ECB 'remedial' action, in trying to sort it's own book's DB may well topple the 1st domino in Spain or Italy, which then will most certainly rebound to bite DB's own butt - ...When thieves fall out.....Very Interesting times ahead....
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