The ShinesRooms.com Provides Stock Research on Banco Santander S.A. and UBS AG
New York City, New York -- The measures taken by the European Central Bank (ECB) since late 2011 have helped stabilize the European banking system. Although the debt crisis in the Eurozone is far from over, the outlook for major European banks such as Banco Santander and UBS AG has improved significantly. As the Eurozone debt crisis escalated in the summer of 2011, the ECB was forced to take some measures. The biggest concern at the beginning of 2012 was that the Eurozone debt crisis would bring down the banking system in the region. However, the ECB’s Long Term Refinancing Operations (LTRO) helped in stabilizing the European banking system. The ECB launched its LTRO in December 2011, providing banks with cheap funding.
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In the first LTRO, banks borrowed some 489 billion Euros. In February last year, banks borrowed another 530 billion Euros in cheap loans from the ECB. The LTRO programs lowered the risk of a systemic crisis in the Euro thus bringing some respite to the banking system. Another major step from the ECB President, Mario Draghi, last year helped in easing concerns over the Eurozone economic woes. In July last year, Draghi pledged to do “whatever it takes” to preserve the Euro.
Last month, the ECB said that several European banks, which borrowed under the LTRO programs, are repaying the cheap loans early. This is another sign that the European banking system has stabilized. The ECB said two weeks ago that it will get back 137 billion Euros from 278 banks on January 30.
ECB President Draghi said that the three-year loans provided by the central bank helped in avoiding a major funding problem which could have had unexpected and dramatic consequences on the financial system. He noted that markets are experiencing a renewed sense of relative tranquility.
Another relief for European banks was the relaxation of a rule designed to make sure that big banks are able to cope with a financial crisis without running out of cash. The Basel Committee on Banking Supervision last month delayed the full implementation of a rule known as “liquidity coverage ratio”, giving banks more time to improve their liquidity position and strengthen their balance sheet.
Spain’s Santander, the biggest bank in the Eurozone in terms of market value, last week reported a 59% drop in 2012 profit as provisioning hit the bank’s bottom-line. However, Santander expects a turnaround in earnings in 2013. Emilio Botin, Chairman of Santander, said last week that the bank’s 2012 results mark turning point for profit. Botin said that in 2013, with exceptional write-offs behind it, the bank should see a marked recovery in results. For 2012, Santander reported a profit of 2.21 billion Euros, down from 5.35 billion Euros reported in 2011.
Meanwhile, UBS reported its results for the fourth quarter yesterday. The Swiss bank saw a $2.08 billion on the back of legal proceedings and restructuring as a result of a number of negative scandals. Nonetheless the new CEO, Sergio Ermotti, stated that UBS “made decisive progress in executing our strategy last year and started 2013 in a strong position. Our financial strength, our attractive and unique business mix and our enviable global client franchise give us a competitive advantage.”
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