In front of a branch of the worldwide Spanish bank “Spadel” in Madrid (Getty)
gives height borrowing costs Long overdue batch to European banksafter she finished central banks Last year was a decade of very low interest rates, as they are in the US.
Two of the largest corporate lenders have disclosedMortgages In Europe, the Swedish SEB and the Spanish Sabadell recently reported strong earnings for 2022, as the trend helped boost lending.
But while high interest rates It is considered good news for bank profits, as it portends a slowdown in the European economy affected by the Russian war in Ukraine and prices that put pressure on borrowers, and could explode price bubbles, especially in the real estate sector.
In the context, Reuters quoted Jerome Legras, from Axiom Alternative Investments, as saying: “On the one hand, interest rates are rising, which is good and helps banks. But the economic outlook is uncertain and the risks of credit losses are high. Investors will pay close attention to what you say. Banks about the future, because they want them to keep paying dividends.”
In the coming days, Europe’s top lenders, including Switzerland’s UBS, Italy’s UniCredit and Dutch bank ING, will reveal how this trend affects them as they determine their results for 2022.
Britain, one of the largest credit markets in the region, where interest rates rose faster than in Western Europe, is considered a market leader.
British banks have indicated that they expect 2023 earnings to grow even though the economy is unstable, while NatWest, one of the largest retail lenders, expects to increase its returns on shares, a key profitability measure.
Other leading British banks, such as HSBC, Standard Chartered and Barclays, are scheduled to reveal their results later in February.
23,885 court rulings were issued against British companies indebted to money in the last quarter of 2022, an annual increase of more than half, in reference to the distress experienced by small businesses, according to the Begbies Traynor Group.
“It’s a bit of an irony for banks because they serve customers who are struggling day in and day out,” said Tom Merry, banking strategy adviser at Accenture.
The British property market is also volatile, with house prices falling 2.5% in the fourth quarter of last year, the biggest drop in 3 months since the financial crisis.
In the wake of the market chaos unleashed by former Prime Minister Liz Truss’ tax cut plans last September, lenders pulled around 1,700 mortgage products in a week, before reintroducing them at rates 1-2 percentage points higher, to the detriment of borrowers.
The monthly CBRE index showed that values on commercial real estate, such as offices, also fell by more than 13% on average in 2022.
Investors’ fears and attempts to withdraw money led to the suspension of “BlackRock”, “M&G” and others, some withdrawals of real estate funds, which made about 15 billion pounds of assets in limbo.
In this context, Jackie Bowie, of the risk management company “Chatham Financial”, said that banks are facing having to pump more money into real estate investments with large prices.
A similar picture is emerging in Germany, where the largest bank, Deutsche Bank, is benefiting from higher interest rates and is expected to post profits for the 10th consecutive quarter, the longest streak in at least a decade. Analysts expect the biggest gains from corporate and retail divisions that benefit from higher rates, although revenues at the global investment bank are likely to decline due to less deal-making.
But the threats remain. Banks in Germany and Austria have been particularly active in commercial real estate, according to the European Banking Authority, which analyzed €1.3tn in commercial real estate lending across the EU.
German financial regulator BaFin recently warned that a rapid rise in interest rates could burden some banks, as loans may default.
Deal-making is unlikely to save the banks as large corporate financial transactions, such as acquisitions or stock market listings, decline, triggering a round of Wall Street layoffs.
(Reuters, The New Arab)
