Banks across Europe mostly beat estimates for first-quarter earnings today, as markets from Italy to the Netherlands showed signs of economic recovery taking hold.
Margins improved, volumes rose and bad debt provisions fell as banks edged closer to something resembling optimism for the rest of the year. Many banks also disclosed sizeable exposures to Greek sovereign debt, in some cases well over €3 billion, but the general line was that the risk was under control and not considered a cause for concern.
Europe's bank index was 0.9 per cent lower at the open, however, in an early sell-off that was a continuation of yesterday's declines, as investors took profits following a blockbuster Monday surge driven by the euro rescue package.
Dutch bancassurer ING beat even the most optimistic forecasts for the first quarter, as volumes picked up at the retail bank and sales improved in insurance. ING said market conditions were lessening the factors that had dragged on results for the previous 18 months.
Its Benelux peer, Belgian bancassurer KBC, beat forecasts on strength in merchant banking and said it took expected loan losses to decline.
Fellow Belgian bank Dexia also beat expectations yesterday and said it was on track to exit state guarantees next month.
Italian banking leader UniCredit easily beat estimates and said it was considering strategic options for its Pioneer asset management business.
Pekao, Poland's number two lender and a UniCredit unit, posted stronger profits on operational improvements, though it missed consensus expectations.
Meanwhile Germany's largest retail bank, Deutsche Postbank, returned back to profit in the first quarter, driven by higher deposits and increased loan demand. Writedowns also fell sharply.
The recovering French bank Natixis beat forecasts yesterday after markets closed, and affirmed its revenue target though it took a cautious stance and warned of an uncertain, volatile environment. Perhaps echoing Natixis's caution, banks in other parts of the world reminded overnight that the market, while improving, was not yet fully recovered.
Australia's top home lender, Commonwealth Bank of Australia, missed profit forecasts on continued high bad debt charges, even as it flagged improving demand from corporates.
Reuters