Blain's Porridge Extra - European Banks

Something extra to digest this morning…

Blain’s Relative European Banking Spectrum – “The Good, The Bad and The Ugly”

I spent the bulk of my investment banking career as a financial institutions banker. All these wasted years have given me super-powers of scepticism when it comes to understanding banks. I’ve compiled this note as doubts and fears escalated around European banking. My conclusion is there are problems, but the real issue is the relative speed at which different banks have adapted to the changing environment since the Global Financial Crisis began in 2007.

To give my arguments some depth, and demonstrate that I can still use a spread sheet, I’ve used some very simple of metrics to examine bank assets, earnings, capital, liquidity and the quality of management, plus market confidence, to determine where European banks lie on the Good to Ugly spectrum. I’ve overlaid the analysis by comparing it to Tier 1 and senior CDS prices. It throws up some interesting thoughts.

Now I would welcome any thoughts or arguments on the topic.

And, If you’d like added to our regular runs on bank paper – you know who to call..

Bill Blain

Head of Capital Markets / Alternative Assets