Second-quarter earnings this year collided with European Banking Authority stress tests to give European banking-sector investors plenty to mull over. So as the reporting season fades into the rear-view mirror, what stands out, and which banks have prevailed?
Lloyds Banking Group (LYG) was the clear second-quarter and first-half winner among its U.K. peers from a results perspective, though its stock has been outpaced by rivals in recent days.
The bank recorded a 101% increase in post-tax profit to £1.8 billion ($2.3 billion) for the first half, due in part to a £1.5 billion fall in the value of litigation charges, and on an adjusted basis, earnings fell by just 2%.
Lloyds shares are up by around 2% from their pre-results closing price. The stock is down by 25% in the year to date.
Barclays (BCS) saw post-tax profit fall by 23% to £1.3 billion. But it reported progress in its core division and could benefit from the international diversification at its corporate banking operation, in light of lower interest rates in the U.K. and uncertainty stemming from Brexit.
Barclays stock is up by more than 8% from its pre-results closing price. The stock is down by around 25% year to date.
HSBC (HSBC) saw a decline of 30% in post-tax profit, to $7.4 billion, for six months ending June 30.
However, it smoothed over the effects of the bottom-line result by announcing a $2.5 billion share buyback to be funded by proceeds from divestitures. Analysts are also expecting another payout of as much as $3.5 billion next year once it repatriates earnings from its U.S. unit.
HSBC stock is up by more than 6% from its pre-results closing price and is the only large U.K. bank whose share price has made a positive return in 2016. The stock is up 3.5% since the start of the year.
Royal Bank of Scotland (RBS) has shown itself to be the black sheep of large U.K. banks as losses spiral, more than seven years in to its restructuring efforts.
Net interest income was broadly stable for RBS in the first half but accelerating losses in the non-core division and a one-off payment to majority owner, the U.K government, led the group to a £2 billion loss in that period. The loss was more than ten times greater than the number reported at the same time in 2015.
Royal Bank of Scotland stock is down by around 2% since results and by 37% from the start of the year.
UniCredit (UNCFF) beat expectations for second-quarter earnings and sought to boost its capital buffer with the sale of its card processing business to payments firm SIA.
It reported net profit of €916 million for the period, which was above the top end of expectations from analysts, and it gained €500 million from the sale of the card processor. The stock is up by 13.8% from its pre-results closing price.
Monte dei Paschi (BMDPF) is the focus of most interest within the Italian banking sector, however, as the beleaguered lender awaits news on its looming bailout, a third in just as many years.
Under the terms of the draft package, the bank will receive a capital injection of up to €5 billion and will offload its entire non-performing loan portfolio to specialist investors, if the rescue is successful. It will receive close to €10 billion for its non-performing loans portfolio.
The private, but state-backed, investment vehicle Atlante II, announced late on Monday that it has raised more than €1.7 billion to buy up NPL across the Italian banking sector. This takes it past the minimum threshold needed for Atlante to operate and it covers the €1.6 billion it pledged as part of Monte dei Paschi's bailout package.
Monte dei Paschi stock rose by as much as 3.5% in response to the news but is still down 80% from January's €1.23 level.
Credit Suisse (CS - Get Report) emerged well from its second-quarter results bulletin but failed to quash worries about its capital position. The Swiss bank posted an unexpected second-quarter net profit of 170 million Swiss francs ($172.8 million), beating a projected loss of Sfr192 million.
Both Asia and wealth management propelled earnings, vindicating CEO Tidjane Thiam's decision to make those areas a priority, while the heavily restructured investment banking and capital markets unit returned to the black. But Thiam sounded a cautious note about the second-quarter outlook and despite his insistence to the contrary, worries about the bank's common equity Tier One capital ratio - which stood at 11.8% at the end of the quarter - persist. (The Swiss National Bank predicted in June that both UBS and Credit Suisse would need to raise Sfr10 billion of capital). The stock fell sharply when the results were announced on July 29 and the shares remain down more than 4% on their value as of just before the announcement .
Since the start of the year the stock has fallen close to 49%.
UBS also comfortably beat earnings expectations in the second quarter, but like Thiam, CEO Sergio Ermotti put tough market conditions ahead. UBS said net profit slipped to Sfr1.03 billion ($1.05 billion) from Sfr1.2 billion a year earlier, easily above the Sfr668 million average forecast of analysts polled by Bloomberg. But profit at its wealth management unit, the holy grail of its turnaround program, slipped.
UBS, widely considered one of the more robust European banks, had a common Tier One equity ratio of 14.2% at the end of the quarter.
UBS stock rose on July 29 and the shares are up marginally on their value as of just before it announced the results. Since the start of the year the stock is down about 28%.
But dissatisfaction with the bank's return on equity, which was 10.1% in the second quarter, persists, as do calls for steeper cost cuts.
Deutsche Bank (DB - Get Report) is the target of the starkest capital worries of Europe's leading banks. The institution announced marginally better-than-forecast second-quarter net profit of €20 million ($22 million), which was down 98% year-on-year, and a one basis point increase in its common equity Tier One capital ratio to 10.8%. CEO John Cryan said on July 27 that the capital worries were misplaced but on July 29 it emerged as one of the weaker performers of the 51 banks stress tested by the European Banking Authority. It was found to have a common equity Tier One capital ratio of 7.8% in 2018 under the EBA's so-called adverse scenario.
And this week it was found to have a capital shortfall of €2 billion under Goldman Sachs' own analysis of the EBA stress tests.
Cryan said on July 29 the bank is on track to have a Tier One capital ratio of at least 12.5% by the end of 2018. UBS analysts are penciling in a full-year stated loss of €900 million at the bank. After the second-quarter results Barclays also cut their earnings forecast and price target, noting that Deutsche Bank is doggedly pursuing its restructuring plan "with a persistence and patience that is at odds with its distressed share price."
Deutsche Bank shares have slipped more than 5% since July 26, the eve of the second-quarter results announcement, and are down 46% so far this year.
Santander, (SAN) the largest eurozone lender, posted a 50% decline in net profit to €1.28 billion. But that result was nevertheless better than expected. The bank is heavily exposed to the U.K., and therefore the fallout from the Brexit vote, since Britain is its biggest single market. It has also been cutting branches and jobs at home to mitigate against revenue pressure from rock-bottom rates.
Chairman Ana Botin pointedly kept the bank's full-year earnings and dividend guidance intact when it announced its results on July 27. The shares have edged up more than 2% since just before that announcement and have declined about 18% in the year so far.
BNP Paribas, France's largest lender, eked out a 0.2% increase in second-quarter profit as strong revenue at its corporate and institutional banking unit offset a decline in retail banking revenue. Profit rose to €2.56 billion, bolstered by one-time gains. The bank reduced its forecast for stable retail banking revenue this year and CEO Jean-Laurent Bonnafé is now expecting a 2% to 3% decline.
The stock has risen close to 3% since July 27, the day before the earnings announcement, and has lost just under 18% so far this year.