Factbox: Latest on expected passes, fails from bank tests

(BestGrowthStock) – “Stress tests” on European Union banks due from regulators on Friday aim to bolster confidence in the sector by making clear which lenders are healthy and which need to raise capital.

Tests on 91 financial institutions simulate worsened economic conditions including declines in the value of sovereign debt they hold.

Bankers, regulators and government officials have been busy commenting on what they expect from the tests. Below is a selection of those comments, sorted by country.

*** COUNTRIES IN MARKET FOCUS, ALPHABETICALLY ***

FRANCE – PASS EXPECTED

BANKS PARTICIPATING: BNP Paribas; Societe Generale; Credit Agricole; BPCE, parent of Natixis.

OFFICIAL COMMENTS: Bank of France head Christian Noyer said there was “no reason” to believe French banks would fail Europe-wide stress tests as they were regularly tested by the regulator. (Europlace business forum, July 6).

WHAT ANALYSTS SAY: Most expect all banks to pass. Some brokers using a harsher stress test than CEBS have cast doubt on Credit Agricole’s capital strength.

GERMANY – 1 FAIL, 13 PASSES EXPECTED

BANKS PARTICIPATING: Deutsche Bank; Commerzbank; Hypo Real Estate; Landesbank Baden-Wuerttemberg; Bayerische Landesbank; DZ Bank; Norddeutsche Landesbank; Deutsche Postbank; WestLB; HSH Nordbank; Landesbank Hessen-Thueringen; Landesbank Berlin; Dekabank Deutsche Girozentrale; WGZ Bank

COMMENTS: With the exception of nationalized Hypo Real Estate no German bank in the test is expected to fall below the minimum capital threshold required to pass the exercise, several sources close to the banks told Reuters. Head of German banks association said that “all in all” he expected German banks to perform well.

WHAT ANALYSTS SAY: Apart from Hypo Real Estate, some analysts using different stress test assumptions have said Commerzbank would need more capital in their scenario.

GREECE – PASS EXPECTED

BANKS PARTICIPATING: National Bank of Greece; EFG Eurobank; Alpha Bank; Piraeus Bank; Agricultural Bank of Greece; TT Hellenic Postbank

OFFICIAL COMMENTS: Central bank chief George Provopoulos has said he expects Greek lenders to “smoothly pass” the tests. Bank sources told Reuters on Thursday that European bank regulators had toughened the test criteria.

WHAT ANALYSTS SAY: Citi analysts say NBG would need capital in their own stress test scenario. Credit Suisse sees all but two Greek banks – ATEbank and Piraeus – out of the recapitalization zone. ATEbank’s management said in May that it was considering boosting its capital.

IRELAND – 1 PASS, 1 CONDITIONAL PASS EXPECTED

BANKS PARTICIPATING: Bank of Ireland; Allied Irish Banks

OFFICIAL COMMENTS: Finance Minister Brian Lenihan and central bank Governor Patrick Honohan both said that the two Irish banks had already passed domestic stress tests that were tougher than the EU test.

ITALY – PASS EXPECTED

BANKS PARTICIPATING: Intesa Sanpaolo, UniCredit, Banca Monte dei Paschi di Siena, UBI Banca, Banco Popolare

OFFICIAL COMMENTS: Bank of Italy Governor Mario Draghi said last week he was confident stress tests would show individual banks’ capital is strong enough and that financial bases are sound.

PORTUGAL – 1-2 FAILS POSSIBLE

BANKS PARTICIPATING: Caixa Geral de Depositos, Millennium bcp, Banco Espirito Santo, Banco BPI.

OFFICIAL COMMENTS: Treasury Secretary Carlos Pina said stress tests showed a solid, well-managed banking system without capital problems and tests results would reinforce investor confidence in Portugal.

WHAT ANALYSTS SAY: Millennium bcp and Banco BPI have failed stress tests by brokers including JPMorgan, Macquarie and Keefe, Bruyette & Woods using different assumptions than CEBS.

SPAIN – SOME CAJAS EXPECTED TO FAIL

BANKS PARTICIPATING: Banco Santander; BBVA; Banco Popular Espanol; Banco de Sabadell; Bankinter; Banco Pastor; Banca March; Banco Guipuzcoano; all unlisted savings banks or “cajas”.

OFFICIAL COMMENTS: The director general of the Spanish Confederation of Savings Banks (CECA) has said he did not expect nasty surprises, but did not rule out some lenders having to raise capital. Newspaper El Pais reported on Friday that several Spanish banks would be found to need new capital under the test scenarios, citing unnamed financial sources.

WHAT ANALYSTS SAY: Analysts expect no problems at the big listed banks. They expect capital shortfalls at some cajas to be covered by the Bank of Spain’s restructuring fund in a process that started before the stress tests were announced.

*** OTHER COUNTRIES ALPHABETICALLY ***

AUSTRIA – PASS EXPECTED

BANKS PARTICIPATING: Erste Group Bank; Raiffeisen Zentralbank.

OFFICIAL COMMENTS: Austrian central bank Governor Ewald Nowotny said the Austrian banks’ results would be “in a normal range” and that he did not expect the test to show any capital requirements.

BELGIUM – PASS EXPECTED

BANKS PARTICIPATING: Dexia, KBC

COMMENTS: Both have passed the tests, according to business dailies De Tijd and L’Echo (July 17: [ID:nLDE66H0EI])

WHAT ANALYSTS SAY: Citi analysts say Dexia screens poorly in its own stress test scenario, while KBC would need to raise capital by 2012.

CYPRUS – NO INDICATION

BANKS PARTICIPATING: Bank of Cyprus, Marfin Popular Bank.

DENMARK – NO INDICATION

BANKS PARTICIPATING: Danske Bank; Jyske Bank; Sydbank.

FINLAND – NO INDICATION

BANK PARTICIPATING: Pohjola Group

HUNGARY – NO INDICATION

BANKS PARTICIPATING: OTP; FHB Mortgage Bank

LUXEMBOURG – NO INDICATION

BANKS PARTICIPATING: Banque et Caisse d’Epargne de l’Etat (BCEE), Banque Raiffeisen

MALTA – NO INDICATION

BANK PARTICIPATING: Bank of Valetta

NETHERLANDS – PASS EXPECTED

BANKS PARTICIPATING: ING, SNS Bank, Rabobank, ABN AMRO/Fortis.

OFFICIAL COMMENTS: Dutch Finance Minister de Jager said he was confident about the outcome the stress tests and a test last year showed no banks needed money, except for ABN/Fortis, which later received capital.

POLAND – PASS EXPECTED

BANKS PARTICIPATING: PKO BP. Other major Polish banks are all owned by other European banks.

OFFICIAL COMMENTS: Polish central bank governor Marek Belka said, “I haven’t got the slightest concerns about the result of PKO BP’s (test).

SLOVENIA – PASS EXPECTED

BANKS PARTICIPANTS: Nova Ljubljanska Banka (NLB)

OFFICIAL COMMENTS: While Finance Minister France Krizanic said NLB — of which the state is the biggest shareholder — will pass, NLB on Wednesday surprisingly announced plans to raise 400 million euros in equity this year, the first bank to announce a share issue in the run-up to the publication of the stress tests.

SWEDEN – PASS EXPECTED

BANKS PARTICIPATING: Nordea, Handelsbanken, SEB and Swedbank.

OFFICIAL COMMENTS: The chief economist at Sweden’s financial watchdog has said that the country’s top four banks will come out looking good in the EU stress tests.

UNITED KINGDOM – PASS EXPECTED

BANKS: HSBC Holdings, Barclays, Royal Bank of Scotland and Lloyds Banking Group

OFFICIAL COMMENTS: UK finance minister George Osborne said UK banks would not need any government help to shore up their financial position after the tests. Banks were recapitalized after stress tests in 2008 and 2009, and the testing is now ongoing.

Investment Analysis

(Reporting by Reuters bureaux; compiled by Boris Groendahl and Jason Neely)

Factbox: Latest on expected passes, fails from bank tests