EU banks: loan lags pad easy quarter but economic pain only postponed
EU bank investors are scrutinising third-quarter earnings with two questions in mind. First, how much money will lenders be able — or allowed — to make as interest rates rise? And second, will this be more or less than they will lose from deteriorating loans as the gas-crunched European economy heads south?
In terms of macro forces, a recession in Europe seems all but inevitable. In Germany and Italy, gas consumption by industry — a key indicator — was down around 20 per cent in September, says think-tank Bruegel.
So far, neither Deutsche Bank nor UniCredit, who both reported third-quarter results on Wednesday, are seeing any real signs of distress. That points to the relative strength of their loan books — with a limited exposure to riskier segments such as consumer finance — but a lag is to be expected.
This story originally appeared on: Financial Times - Author:Tax Cognition
