Greater capital clarity gives Green, Amber and Red lights for bank divis and coupons
Growing clarity of capital requirements for many Eurozone banks in the last few weeks should start to reduce perceived risks for many banks securities and increase visibility on capacity for bank divis or coupons. In this cross-asset note, we explore the implications and investment opportunities.
* Cutting BBVA PT (to €8.5 from €9.6) and SAN PT (to €5.3 from €5.9) on lower divi assumptions
Bank Equity: The Good, the Bad and the Challenged.
The wave of new SREP disclosures released in recent weeks re-inforces some of our key calls for 2016 – and should help reduce the perceived risk of some banks securities. We think asset quality is the largest driver behind the wide divergence (175bp to 325bp) of Pillar II requirements, consistent with ECB efforts to incentivise sharper non-core rundown, and informs our estimates for banks yet to disclose. We think Natixis, ABN, KBC, Bankia and UBS – with the highest management buffers – could positively surprise on payouts. We continue to believe full cash dividends will be constrained for some of the GSIFI banks (UCG, HSBC, SAN, BBVA, BNP, DB) and reinforces the need for non-core run down or stake sales. We also think BARC could negatively surprise on divis.