This week, Europe's largest banks will release their first-quarter earnings, and investors are keen to see how they have navigated the recent financial turmoil. The collapse of three US banks and the failure of Credit Suisse Group AG, which was subsequently rescued by UBS Group AG, have dominated recent headlines. However, bank stocks have rebounded this month, with the sector the second-strongest gainer on the Stoxx Europe 600 Index.
Credit Suisse reported outflows of 61.2 billion Swiss francs ($69
billion) in Q1, highlighting the challenge for UBS in retaining key clients and assets after the emergency takeover. UBS's new CEO, Sergio Ermotti, who has been brought back to manage the integration of the two banks, will be questioned about his strategy for the world's largest wealth manager on Tuesday. Spain's Banco Santander SA is also due to report the same day.
Results from Svenska Handelsbanken AB and Skandinaviska Enskilda Banken AB will be scrutinized for signs of pain in commercial real estate lending as soaring interest rates raise the risk that some borrowers in the sector will struggle to pay their instalments.
On Thursday, fixed-income traders at Barclays Plc and Deutsche Bank AG will be in the spotlight, with markets assessing how well revenues held up against tough comparisons from a year ago. NatWest Group Plc will round out the week on Friday. Highlights to look for this week:
Monday:
Credit Suisse's key wealth management unit reported a net outflow of 47.1 billion francs and also disclosed a 1.3 billion-franc impairment charge, which is mainly linked to that business. The bank's earnings report stated that while outflows have eased, they have not yet been reversed. The Swiss unit also experienced outflows of 6.9 billion francs, with most of the outflows coming from private clients. Credit Suisse's liquidity position still relies on the Swiss National Bank's credit facilities, with the net amount of borrowings totaling 108 billion francs in March, after repayments of 60 billion francs in the quarter. There were further repayments of 10 billion francs as of Monday. Credit Suisse emphasized that the deal with UBS must succeed, or else it may face difficulties in surviving.
Tuesday:
UBS (UBSG SW) is set to release its earnings report at 6:45 a.m. CEST. The market is eagerly anticipating the return of former CEO Ermotti, who is expected to shape the bank's future direction following its takeover of a local rival. Analysts are particularly interested in UBS's efforts to retain top talent and wealthy clients in light of increased risks associated with client loss. Additionally, the resumption of share buybacks, which have been suspended since the acquisition, is also a key point of interest. Analysts predict weak results for the bank's trading and dealmaking units in the first quarter, with equities revenue down 13.5% and advisory expected to plunge 23%.
Santander (SAN SM) is also set to report its earnings at 6:45 a.m.
CEST. Despite recent financial turbulence, Spain's largest lender has
already reported adding over one million new customers in the first
few months of the year. It expects first-quarter revenue to increase
at a double-digit percentage rate, with lending and deposits
growing by 4% and 6%, respectively. These figures should enable
the bank to meet its 2023 targets. The bank is targeting a RoTE
above 15% this year and between 15% and 17% in the 2023 to
2025 period. Analysts at Deutsche Bank predict another positive
quarter for the entire Spanish industry, despite a 4.8%
extraordinary tax on interests and fees introduced by the
government. The Bank of Spain has also stated that the recent
turbulence in the finance world is unlikely to have a significant
impact on Spanish lenders, as diverse depositors and ample
guarantees diminish the risk of surging withdrawals.
Wednesday:
Handelsbanken (SHBA SS) is set to release its report at 6:30 a.m.
CEST, with analysts focusing on its net interest income (NII) and
cost increases. According to estimates compiled by Bloomberg, a
jump of nearly 40% in NII is expected, which is feasible, given the
similar uptick in the previous quarter. Deutsche Bank analysts
anticipate higher rates and deposit margin benefits providing
support, although seasonally lower expenses may be offset by
higher year-on-year staff costs. The consensus estimate of 8% cost
growth from last year may turn out to be too low due to elevated
development costs.
SEB's (SEBA SS) update is scheduled for 7 a.m. CEST, with
expectations of a 44% surge in NII year-on-year, while commission
and fee income are seen down 3.5%, according to Bloomberg's
estimates. Deutsche Bank suggests that lost market shares in
mortgages could balance out growth in corporate lending during the
quarter. However, costs are likely to have increased due to
inflationary pressures. Credit Suisse analysts warn of elevated risks,
particularly in Sweden, despite not factoring in any significant real
estate price correction into their estimates for banks. BI suggests
that NII momentum may continue through the first half, adding
upside to 2023 estimates.
Thursday: Barclays (BARC LN) is set to release its Q1 results at 7 a.m. UK time. The bank's fixed-income traders, who were responsible for over 20% of the group's revenue last year, will face a tough comparison to the first quarter of 2022 when they navigated market volatility following Russia's invasion of Ukraine. Bloomberg estimates suggest that FICC may have dropped 11% to around £1.5 billion ($1.9 billion) YoY. However, this result could still serve as a cushion as the tailwinds of NII from central bank rate hikes subside. Analysts Lento Tang and Jonathan Tyce from Bloomberg Intelligence expect the lender to confirm its "cautious" UK net interest margin guidance of above 3.2%, which underwhelmed investors last quarter. Deutsche Bank (DBK GY) is expected to release its results around 7 a.m. CEST. With capital returns being a focal point for investors, the ratio and any potential for second-half repurchases will be monitored, following optimistic comments in March from CEO Christian Sewing on intra-quarter developments. Strong NII growth is expected, with key metrics of fixed-income and trading revenue showing momentum, despite a tough YoY comparison. Evidence of expense control is required for Deutsche Bank to meet its goals, although bank levies will have also contributed to Q1 costs. Bloomberg consensus sees quarterly FIC dropping almost 10% to €2.56 billion ($2.8 billion), a CET1 ratio of 13.3%, up from 12.8%, and a 26% jump in NII to €3.6 billion. Friday: NatWest (NWG LN) is set to release its first-quarter results at 7 a.m. UK time. The bank has previously guided for a full-year net interest margin of around 3.2%, but analysts at BI and Citi expect it to exceed this guidance. If credit losses in the first quarter are lower than expected, NatWest could surprise on the upside, according to BI. However, if there are early signs of increasing customer defaults, the bank might need to top up its provisional buffers. As of now, estimates compiled by Bloomberg predict a provision of £259 million. The market will closely watch the results for any signals of the bank's performance, especially given the challenging economic climate.
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