"Dear ceo..." thus begins, in a confidential tone, the letter that Andrea Enria, chairman of the board of European Banking Supervision, he mailed last Thursday to the 117 institutions under his direct supervision. Beyond the customary courtesy, however, the letter stems from the concern of Frankfurt's "guardians" about the solidity of the banks in the euro area under the stress of the pandemic: here and there, Enria suggests, the echo of some crunch, despite the dividend diet imposed since last March, one of the causes that explain the poor season of the sector on the various price lists (about -15% against double-digit increases in the rest of the market.
Bankers are grumbling but the numbers speak volumes. The alarm, which anticipates the examination to which the institutes will be subjected in the summer, is more than a simple precaution: according to the most extreme hypothesis of the Frankfurt forecasting model banks could find themselves facing a veritable tsunami of non-performing loans: up to 1.400 trillion euros, far more than the storm faced in 2008/09. But, unlike then, the situation is not the same for everyone. And so Enria, the same one who months ago urged the banks to "have more courage" (an invitation accepted by Intesa Sanpaolo with the Ubi operation) increased the dose on Thursday by speaking in front of the bankers gathered in London by the Financial Times: "It's our intention – he said – to challenge the banks to set up models that convince us that they are able to return to remunerating their shareholders”.
In short, the absolute ban on paying dividends is about to be dropped. But only those institutions that demonstrate that they are able to do so will be able to detach coupons because they have adopted an appropriate approach in terms of provisions sufficient to avoid a significant increase in defaults. This will be the key point, alongside the macro projections which will be the guidelines of the Supervisory action pending the tests which will be conducted by the EBA in July.
The new course of the ECB thus offers room for growth in the sector even if, as Equita notes, it is probable that the regulator will only authorize the profits generated in 2020 while "the distribution of previously set aside reserves seems very unlikely to us". For this reason, Equita believes that the banks most interested are those with better profitability. Intesa Sanpaolo is certainly at the forefront for which the Milanese Sim expects a dividend per share on 2020 profit of 14 cents, equal to a profitability of 7%, but also Mediobanca which should boast a similar yield. Also for Ubs Intesa it is the best positioned group, also because it is able to practice a dividend policy "stable thanks to a high capacity to generate returns thanks to a very conservative provisioning policy and maintaining a buffer of 450-500 basis points", well above the rest of the banks in the Eurozone.
All banks, according to Ubs, will close 2020 with a Rote (an indicator that does not calculate goodwill) which for Intesa will exceed 7,3% or five times the Unicredit figure (1,5%), ahead of Banco Bpm (1.8%) and Bper (3,8%). Compared to liquidity, however, the first in the class is Creval, with a buffer of 8,65% which alone justifies both the takeover bid launched by Crédit Agricole and the requests for a raise by the current shareholders.
