Are Bank Guarantees Coming For Europe? (NBG, IRE, STD, BBVA, DB, BCS, UBS)

May 21, 2012 by Jon C. Ogg

It is never a good thing to see a run on the banks.  That is what the fears were recently indicating in Greece.  The problem is that Spain is a much larger problem due to excessive lending and the notion that it is a much larger economy than Greece.  And what about Italy?  Spain and Italy have just recently seen bank rating downgrades.  And you know more downgrades are coming.

So the question is, ahead of a summit aimed at putting up fences in Europe to contain problems can the banks really make it.  We have heard all sorts of new stories and rumors and frankly it is hard to know what is posturing, what is malarkey, and what is reality.  Some talk about bank guarantees is out there, and other chatter is on deeper assistance.  And what about lending directly to banks but not the nations? Reuters has a speech today worth a read that underpins some of the problems and hopes for Europe given by ECB policymaker Joerg Asmussen.

A look at the banking ADRs today signals that the bank issues “may” be manageable for Greece or Ireland.  The problem is that this could just be a short-covering head fake too.  The ADRs for Spain are still in the red.

National Bank of Greece SA (NYSE: NBG) is up 4% at $1.56 against a 52-week range of $1.45 to $7.65.  The Bank of Ireland (NYSE: IRE) is up 3.8% at $4.93 against a 52-week range of $3.99 to $17.50.

Banco Santander, S.A. (NYSE: STD) is down 1.2% at $5.70 against a 52-week range of $5.52 to $11.92; Banco Bilbao Vizcaya Argentaria, S.A. (NYSE: BBVA) is down 1.1% at $6.19 against a 52-week range of $5.96 to $12.13.  An IIF report on loan losses is holding these banks down today.

And what about broader exposure?  The ADR of Deutsche Bank AG (NYSE: DB) is up 2.6% at $36.95.

Barclays PLC (NYSE: BCS) is technically not even a part of the Euro-woes as far as sovereignty, but it would be absolutely naive to think they have no exposure.  Ditto for UBS AG (NYSE: UBS) in Switzerland.  Barclays is up 2.6% at $11.44 against a 52-week range of $8.38 to $18.40; and UBS is up 1.6% at $11.44 against a 52-week range of $10.41 to $19.62.

JON C. OGG