Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Low valuations hamper euro zone bank mergers: ECB's de Guindos

EconomyOct 14, 2019 06:50AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. FILE PHOTO: Informal meeting of ministers of the Economic and Financial Affairs Council (ECOFIN) and Eurogroup

MADRID (Reuters) - Consolidation is inevitable among banks in the euro zone, but low profitability and low valuations will make this very difficult, European Central Bank vice-president Luis de Guindos said on Monday.

Profitability across the euro zone bank sector is low and weakening economic growth in the region is expected to further dampen the banks' prospects.

Last month, the ECB cut rates deeper into negative territory and promised bond purchases with no end-date, in a bid to reverse the renewed slowdown in the euro zone's economy nearly a decade after the bloc's debt crisis.

Banks have long complained that negative rates weigh on their profits.

"Low profitability in the end leads to low valuation, making the inevitable consolidation of the sector very difficult," De Guindos said at a finance industry event in Madrid on Monday.

De Guindos also said the low profitability of euro zone banks was also related to costly structures and excess capacity.

At the same event, ECB policymaker Pablo Hernandez de Cos said that in the current macroeconomic environment, it was likely interest rates would stay lower for longer, squeezing financial margins further. De Cos called for a strengthening of banks' balance sheets and greater levels of efficiency.

Banks in Spain are still suffering from the after effects of reducing toxic legacy assets left on their balance sheets after the country's real estate bubble burst in 2007, while households are still cutting outstanding debts.

But De Cos, the current governor of the Bank of Spain, said that a recent reduction in toxic real estate assets had allowed Spanish banks to perform more favorably in this year's domestic stress tests than last year.

Low valuations hamper euro zone bank mergers: ECB's de Guindos
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email