Will European banks fail the stress test?

The sector shows promise, but some banks are struggling to raise money.

By Jim J. Jubak Jul 2, 2010 2:41PM

Jim JubakWe now have more details and better projections on the European-bank stress test and on which banks are likely to fail the test.


The smaller-than-expected demand -- just $162 billion -- for three-month loans from the European Central Bank shows, I think, that the European banking sector is in better shape, as a whole, than initially feared. (For more on why this smaller draw is positive news, see this post.)


But the fact that some banks felt the need to grab up roughly $140 billion in six-day money yesterday, July 1, shows that some banks are still having trouble raising money in the financial markets. Analysts estimate that roughly 170 banks in Europe (out of 1,100) are having trouble accessing the markets for capital.


Which banks are still shut out of the financial markets? A big chunk is likely to be Germany's Landesbanks and Spain's cajas. (For more on Germany's Landesbanks, see this post, and for more on Spain's cajas, see this post.)


And how big are the cash calls likely to be from the banks that fail the stress test?


Estimates now say that about 20 banks will fail the test and will need to raise about $37 billion in additional capital. Public sector banks -- that is, banks with government ownership stakes such as Germany's Landesbanks -- would account for about two-thirds of the capital that needs to be raised. Private-sector banks would account for the other third.


Specific names mentioned by bankers and analysts, the Financial Times reported today, include Italy's Monte dei Paschi and Banca Popolare di Milano, and Spain's Banco Popular. Banks and analysts also fingered Greece, Portugal and Ireland as countries with banks that are likely to need to raise capital.


Public release of stress-test results, by the way, have been postponed a week until July 23.


Jim Jubak doesn't own shares of any company mentioned in this post.

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124
124 rated 1
279
279 rated 2
471
471 rated 3
714
714 rated 4
642
642 rated 5
604
604 rated 6
614
614 rated 7
450
450 rated 8
303
303 rated 9
115
115 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
ARCPAMERICAN REALTY CAPITAL PROPERTIES Inc10
BIDUBAIDU Inc10
CITCIT GROUP Inc NEW10
HPQHEWLETT PACKARD CO10
ITUBITAU UNIBANCO BANCO MULTIPLO S.A.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.