Banks Extends Losses in Europe on Capital Adequacy Worries

Lucy Stoeva
09 Feb, 2016
New York City

European market indexes dropped to 2-year lows on the growing concerns over the profitability and the adequacy of capitalization of banks. German industrial production fell 1.2% and exports declined 1.6% in December. Vestas Wind Systems, the wind-turbine maker, reported record revenue in 2015.

[R]4:00 PM Frankfurt, Germany –Stock markets in Europe dropped to two-year lows on the growing concerns over the profitability and the adequacy of capitalization of banks. In Germany, industrial production fell 1.2% and exports declined 1.6% in December. Vestas Wind Systems, the wind-turbine maker, reported record revenue of €8.4 billion in 2015.[/R]

Stock markets in Europe dropped to two-year lows as concerns over the profitability and the capitalization of banks in a low-interest-rate and high-debt environment dominated the market.

Euro Stoxx Banks, the European banking index, fell more than 4% after losing 5.6% on Monday as the negative sentiment continued to drag down major banks.

Deutsche Bank lost 4.3% after erasing 9.5% yesterday, despite its claim that it had sufficient reserves to maintain payments on AT1 securities and would raise legal provisions in 2016.

Shares of UniCredit plummeted 7.3% after announcing declining profits amid restructuring.

In Athens, Greece, Eurobank Ergasias extended two-day losses with a decline of 12.1% after plunging 29.2% on Monday.

In Stockholm, Swedbank tumbled 5.7% after the Swedish lender surprised the markets by replacing CEO Michael Wolf, effective immediately.

In Germany, industrial production fell 1.2% in December from the previous month and exports declined 1.6%, according to official statistical data.

The data made clear that the largest European economy is feeling the effects of the global slowdown and exacerbated concerns about the recovery of the Eurozone.

In London, FTSE 100 index fell 42.68, or 0.75%, to 5,646.68 and in Frankfurt, the DAX index dropped 66.10 or 0.74%, to 8,913.26.

In Paris, the CAC 40 index plummeted 58.85, or 1.45%, to 4,007.46.

Pandora AS dropped 7.3% to 764 Danish kroner despite the growth of 43% in fourth-quarter net profit, the increase in dividends by 44%, and the new share buyback program.

The Danish jeweler proposed a dividend of 13 Danish kroner a share, up from 9.00 kroner a share in 2014.

Net profit for the three months ended Dec. 31 was 1.38 million Danish kroner, up 43% from the same period a year earlier.

Sales reached 5.68 billion Danish kroner, up from 3.96 billion kroner in the same period a year earlier, due to double-digit growth in all of its major markets.

Defying the negative trend, Svenska Handelsbanken AB gained 2% to 102.30 Swedish kronor after one of the largest Nordic banks said profit surged 35% in the fourth quarter.

Net profit rose to 4.50 billion Swedish kronor from 3.34 billion Swedish kronor in the fourth quarter of 2014.

The growth was mainly due to the sale of the bank’s shares in Svenska Cellulosa AB for 1.21 billion Swedish kronor.

The bank proposed a dividend to 6.00 Swedish kronor per share, slightly higher from the 2014 dividend of 5.83 Swedish kronor.

UniCredit S.p.A tanked 7.3% to €2.79 after the major Italian bank said its net profit dropped in the fourth quarter to €153 million, down from €170 million a year earlier.

The decline in profit was mainly due to one-time strategic restructuring costs.

Operating income was little changed at €5.59 billion from €5.60 billion a year ago.

CEO Federico Ghizzoni said the results were good given the challenging macroeconomic environment in the European banking sector.

Vestas Wind Systems AS jumped 7.5% to 410 Danish kroner after the wind-turbine maker reported record 2015 revenue of €8.4 billion and EBIT margin of 10.2%.

Net profit rose to €685 million from €392 million in 2014 as the demand for wind turbine installations increased.

Based on the record new orders, Vesta said it expected more earnings growth in 2016.

The company announced a dividend of 6.82 Danish kroner per share, up from 3.9 kroner a year earlier.