Daily Management Review

‘So Far No Sign Of Financial Stability Risks’


10/27/2016


Third quarter report of European Bank show positive results for some.



Reports on Reuter show that in an environment set by “low interest rate”, the bank of Europe began to report the results of “third quarter”, whereby Laura Frykberg informed that “Lloyds Banking Group” came as a surprise to many, while Santander of Spain had to depend on Brazil for making up for its “weakness”.
 
However, Lloyds’s profit was ‘better than expected’ as it made “1.9 billion pounds” within its third quarter. Similar scenarios of the figures had presented themselves around a year ago when “the political landscape was much clearer”. The Head of Research at Wilson King Investment Management, Richard Hunter, stated:
“There are a couple of things that Lloyds need to keep their eye on of course, we are yet to see what the implications of a hard Brexit might be. But on other hand they're paying over four percent in terms of a dividend yield, which is obviously attractive given the interest rate backdrop.”
 
Meanwhile, the Head of the European Central Bank, seem to be the closest to this subject. The “loose monetary policy” set by Mario Draghi has been “under fire” as it introduced a “culture of excessive debt”. In Draghi’s words:
“We are perfectly aware, that low interest rates for a long time with plenty of liquidity are a fertile ground for financial stability risks. We watch this risk very carefully. We have so far no sign of financial stability risks.”
 
Nevertheless, the “state-run Bankia” of Spain may not show consent in this case for it points finger to “low rates” for the drop of twelve percent in its third quarter’s profit as compared to its previous year’s respective figures.
 
The Co-Founder of Seven Investment Management, Justin Urquhart Stewart, said:
“The economic climate and the overall structure of European banks is still a disaster. These are banks which need overall structure and surgery.”
 
Moreover, Santander’s Europe weakness seems to have been made up with the improvement shown in the results of third quarter performance in Brazil. In fact, it also reassigned prices to “loans” besides raising fees. The net profit beat estimates by one percent, resulting in a high share value of six month.
 
 
 
 
 
 
 
References:
http://www.reuters.com/







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