Stress test on banks: the ECB is contacting some institutions informing them of the risk that the results of the stress tests will be less positive than last year. This is what an article by Bloomberg reports, adding that the European Central Bank is reportedly alerting especially euro area banks that have benefited from the positive effect of interest rate hikes on their interest margin (NII) of the need to make adjustments . From the series: if so far the accounts have shown themselves to be more than solid, following the outcome of the stress tests, the banks could be forced to show greater caution.
The indiscretions were reported by some sources close to the dossier, who also spoke of the irritation of several bankers, according to which the intent of the ECB’s Supervision would be to churn out a worse stress test outcome than the previous ones, to exercise greater pressure on the entire industry.
In the event of unsatisfactory results, credit institutions, to comply with the requests of the authorities, could find themselves forced to curb, for example, the distribution of billions of euros in dividends to their shareholders. If, on the other hand, the test were passed, they could keep faith with the commitments made with stakeholders in terms of coupons, even in a context of uncertainty.
With reference to Italy, it should be remembered that, thanks to the brilliant pitted quarterly reports, relating to the first three months of 2023, big names in the Italian financial sector have promised their shareholders more greedy dividends.
Bper: shareholder ok for €0.12 dividend
Banco BPM: profit surprise. And Castagna doubles dividends
Intesa SanPaolo: all about earnings, guidance, dividends
UniCredit: with Orcel new shower of profits and dividends
“We expect a net profit exceeding €6.5 billion and an increased distribution to shareholders of at least €5.75 billion”announced the CEO of UniCredit Andrea Orcel, after presenting a “Record first quarter net income of €2.1 billion“.
“This year we will be able to distribute 5.8 billion to our shareholders, considering: the May dividend, the second tranche of the buyback, and the November interim dividend”, promised, for his part, the CEO of Intesa SanPaolo, Carlo Messina, presenting the bank accounts for the first quarter of 2023.
Dividends for these Italian banks, but also for banks throughout the Eurozone at risk with less positive results than the ECB’s stress tests? No comment was released by the ECB spokesman contacted by Bloomberg, as well as by the European Banking Authority (EBA) which coordinates the evaluation exams, which should be completed by the end of July.
Of course, the stress tests that have been launched by the ECB put the banks of the euro area to the test. Indeed, institutions will have to demonstrate that they are resilient in the face of the toughest economic scenario ever presented. It must be said that up to now there have been no signs of a crisis, far from it, given the support that has come precisely to their interest margins (NII) from the continuous rate hikes launched by Christine Lagarde’s ECB and the provisions made for hedge against any losses on loans disbursed (NPLs, non-performing loans), which have settled at contained levels despite the current economic crisis.
It was the ECB itself that announced, at the end of January 2023, that it would subject a total of 99 banks subject to direct supervision to the “stress test”.
According to what emerges from the press release, it is learned that the ECB would have examined “57 of the largest banks in the euro area, selected to cover around 75% of banking assets in the area, as part of the 2023 stress test at EU level coordinated by the European Banking Authority (EBA)”.
For its part, the ECB, the note read, would have conducted “its own stress test on 42 other medium-sized banks not included in the EBA’s (EBA) sample because they are smaller”.
The procedure to which the banks will be subjected will simulate an adverse and a less dramatic scenario, testing their solidity for the three years up to 2025. While those directly involved highlight the solidity of their capital levels, Spanish Economy Minister Nadia Calvino explains that the authorities cannot afford to be complacent.
“Certainly the conditions in which the financial sector finds itself are solid – Calvino told reporters, in response to questions on the bank stress tests – But we must pay greater attention and be vigilant, since, in a context of higher interest rates high and liquidity declining, it is clear that the weakest elements that may exist in the sector could be affected”.
Spain will take over the presidency of the European Union at the end of June. In the meantime, the sources anticipated that probably, in the event of less comforting stress test results, the regulators could force the banks to take into account the findings identified by the Central Bank in the event that the discrepancy was excessive.