Eurobanks Weekly Recap: Revenues, Capital & Credit Quality

A slew of reporting to come this (schedule below) but a few thoughts to mull over the weekend.

• What did we learn this week? Credit quality is the dog that didn’t bark, at least not yet, but there may yet be revenue disappointments out there.
  • Swedbank; results marginally ahead, revenues still good, credit quality barely moved even with mgmt adopted a more cautious macro view.
  • SEB; broadly in line, credit quality a tiny bit worse, capital allocation approached altered to give mgmt more flexibility. A minor positive for credit spreads.
  • Bankinter; results missed but this was on weaker revenues (as rates rolled over) and cost overruns. Credit quality reasonable.
• What should we watch for next week?
  • Capital moves; mgmt teams are remodelling risk which can impair capital levels, as can regulatory pressure.
  • Credit quality worsening; a key risk but, with most banks seeing a “soft landing”, little evidence yet.
  • Revenue weakness; the last two years have been positive for banks in this area as rates have risen. The converse will start to feed through; tough for equity holders mainly.