FACTBOX-Capitalisation estimates for European banks

(Adds Goldman Sachs and Societe Generale estimates)

LONDON, July 23 (BestGrowthStock) – With the results of stress tests
on 91 European banks looming, financial institutions have been
coming up with their own scenarios of what to expect.

How financial markets react to Friday’s results may well
depend on the expectations of analysts.

The following comments and capitalisation estimates come
from recent bank notes and/or interviews. For a factbox on which
individual banks are expected to have passed or failed, click on
[ID:nLDE66J0GP].

GOLDMAN SACHS – Overall capitalisation need of 38 billion
euros ($49 billion) for European banks.

Goldman conducted a survey of 376 investors and others to
gauge what the consensus for the results might be. Participants
expected an 89 percent pass rate among the 91 banks and an
overall need of 38 billion euros in capitalisation.

Nine percent of respondents expected a need to raise less
than 10 billion euros, 33 percent between 10 billion and 25
billion euros, 35 percent between 25 billion and 50 billion
euros, 18 percent between 50 billion and 100 billion euros, and
5 percent above 100 billion euros.

A majority of 63 percent said that the amount of capital
raised will leave banks adequately (or overly) capitalised,
while 37 percent saw a capital deficit even after the stress
test.

SOCIETE GENERALE – Overall capitalisation need of 30 billion
euros.

Michala Marcussen, head of economics at the investment bank,
told Reuters journalists at a briefing that her bank calculated
the stress tests would show banks having to take potential
writedowns in a crisis of between 175 billion and 250 billion
euros.

That would lead to a recapitalisation need of 30 billion
euros, something the bank believes to me “manageable”.

DEUTSCHE BANK – Overall capitalisation need of 24 billion
euros to 83 billion euros by 60 European banks.

The bank conducted a partial stress test on the loan books
of 60 European banks (excluding quasi-public banks such as
Spanish cajas and German landesbanks).

It concluded that the banks would need 24 billion euros
under a moderate scenario and 83 billion under a severe scenario
similar to the post-Lehman collapse. That equates to 3 percent
to 10 percent of aggregate tangible equity.

Looking at market reaction, Deutsche said:

“If the official releases confirm DB’s results, and are seen
as sufficiently credible, we see further room for financial
credit spreads to outperform and would expect some additional
relief rally in equities and risky assets in general.

“This would be an important development in supporting
consumer sentiment and global growth prospects.”

NOMURA – Overall need of 75 billion euros.

The Japanese bank conducted its own tests on European banks,
reckoning it had been tougher than the official tests will be.

It estimated the banks would have a capital shortfall of 75
billion euros but suggested that it was the ranking of banks
that would matter to the markets more than the overall number.

Nomura said Swiss, UK and Nordic banks would be in the best
position mainly due to lower expected losses and a higher
capital buffer. Greek banks, due to high domestic debt holdings,
and Italian banks would be among the worst.

“In Germany, Deutsche Bank positions well compared with
Postbank and Commerzbank while French banks, like the Italian
banks, are arguably penalised by the lengthy period to write off
(non-performing loans),” it concluded.

CREDIT SUISSE – Overall need of 90 billion euros.

The bank noted that financial markets seemed to be
relatively optimistic about the results.

Its equity research department estimated that 90 billion
euros would be needed in recapitalisation, but that this
compared with 130 billion euros of readily available capacity.

BARCLAYS CAPITAL – Spain’s cajas to need 36 billion euros,
German landesbanks 34 billion euros, Greek banks 8.6 billion
euros.

The bank said the cajas, landesbanks and Greek banks were
the institutions most likely to fail and therefore to need to
raise new capital.

But it noted its estimates were based on a number of
assumptions and were designed more to compare the potential
capital needs with the programmes in place to address them than
to predict the exact results of the tests.

UBS – Spain at risk

The Swiss bank took a specific look at Spain, one of the
peripheral euro zone economies seen as most vulnerable to debt
problems.

It suggested Spanish bonds were facing a double risk from
the stress tests.

The results could be seen as not credible if they were too
low — a recapitalisation need of less than 15-20 billion
euros, for example.

Alternatively, UBS said, if a large number of more than
50-60 billion euros were needed, markets could be concerned
about Spain’s ability to finance a good portion of it.

Investing Basics

(Editing by Mike Peacock, John Stonestreet)

FACTBOX-Capitalisation estimates for European banks