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Going still tough for European lenders

Thursday, February 09, 2017 - 01:57

Two of Europe's biggest banks are finding the low interest rate environment tough. As David Pollard reports, Commerzbank says it needs to do more to get back to sustainable growth and Societe Generale plans to float a stake in its vehicle leasing unit ALD, as part of efforts to diversify further away from retail banking.

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The winds of change still blow for Europe's banks. Germany's number 2 lender is keen to be seen to be withstanding them. SOUNDBITE (German) MARTIN ZIELKE, CEO, COMMERZBANK, SAYING: "How did 2016 go for Commerzbank? Very well, in my opinion. All divisions have solid, and in part very good results." 183 million euros of Q4 profit did beat estimates. Its shares up nearly two and half per cent despite a forecast for half a billion euros of extra provisions - for bad shipping loans. The bank said in September it would cut a fifth of its workforce, and suspend dividends, to save costs. But the sector climate has also improved. (SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING: "What really this is down to is a reduced tailwind from litigation that has affected the whole financial sector since 2008, but also signs of acceleration in the euro zone economy." There's less sparkle to SocGen's numbers. France's number 2 bank suffering a 40 per cent drop in Q4 net income. It too striving to cut overheads - in its retail and investment arms - while investing in online and mobile services. It plans to float a stake in its ALD vehicle leasing unit. This week, SocGen also reported as spending over half a billion dollars on buying insurer Antarius 1. (SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING: "What SocGen have announced you'll see more and more from large European banks as they look to occupy green-field sites in terms of business, where they haven't got large legacy cost bases and they can build new footprints" And both banks facing another potentially tall challenge - as Donald Trump hints at deregulation for their US counterparts. (SOUNDBITE) (English) PANMURE GORDON CHIEF ECONOMIST, SIMON FRENCH, SAYING: "Do they follow suit in a sort of regulatory race to the bottom, or do they say 'actually, the international standards that we introduced post-2008 are necessary?" A question for now, few of Europe's banks can answer.

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Going still tough for European lenders

Thursday, February 09, 2017 - 01:57