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Europe sovereign debt woes to stunt bank profits
Source: Agencies |
September 6, 2011, Tuesday
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Print Edition
Print Edition
EUROPE'S sovereign debt crisis will stunt bank profits for years and could kill off the weakest, Deutsche Bank Chief Executive Josef Ackermann warned industry bosses yesterdaty amid intense scrutiny of the sector's finances.
"Prospects for the financial sector overall ... are rather limited," the CEO of Germany's top bank said. "The outlook for the future growth of revenues is limited by both the current situation and structurally."
Ackermann was speaking at Frankfurt's annual Banks in Transition conference against a backdrop of gloom in the capital markets, where fears some eurozone countries could default on their debts have sent investors scurrying for shelter.
Shares in the banks that hold much of that debt dropped yesterday towards the two-year lows they reached in August.
Fears about how the crisis will play out have halted the takeovers and stock market listings that are the lifeblood of the bloc's investment banks as slowing global economic growth puts the prospect of recovery further into the future.
Despite his gloomy outlook for profits, Ackermann rejected calls for urgent recapitalization.
International Monetary Fund chief Christine Lagarde called in August for mandatory capitalization of European banks to prevent a world recession .
A forcible recapitalization would "threaten to send the signal that politics has lost faith in the ability of existing measures to succeed," said Ackermann.
He also warned that many European banks could go under if they had to accept the "haircut" on their sovereign debt holdings that has been proposed in some quarters.
"It's stating the obvious that many European banks would not survive having to revalue sovereign debt held on the banking book at market levels," he said.
Deutsche has already warned that hitting 6.4 billion euros (US$9.1 billion) in pretax profit for this year was becoming more difficult and required a quick and sustained resolution of Europe's sovereign debts.
The crisis has kept banks hostage to market concerns about their capital strength and access to funding, concerns that were stoked again last week when a European source said the IMF saw a capital gap of 200 billion euros among Europe's banks.
"Prospects for the financial sector overall ... are rather limited," the CEO of Germany's top bank said. "The outlook for the future growth of revenues is limited by both the current situation and structurally."
Ackermann was speaking at Frankfurt's annual Banks in Transition conference against a backdrop of gloom in the capital markets, where fears some eurozone countries could default on their debts have sent investors scurrying for shelter.
Shares in the banks that hold much of that debt dropped yesterday towards the two-year lows they reached in August.
Fears about how the crisis will play out have halted the takeovers and stock market listings that are the lifeblood of the bloc's investment banks as slowing global economic growth puts the prospect of recovery further into the future.
Despite his gloomy outlook for profits, Ackermann rejected calls for urgent recapitalization.
International Monetary Fund chief Christine Lagarde called in August for mandatory capitalization of European banks to prevent a world recession .
A forcible recapitalization would "threaten to send the signal that politics has lost faith in the ability of existing measures to succeed," said Ackermann.
He also warned that many European banks could go under if they had to accept the "haircut" on their sovereign debt holdings that has been proposed in some quarters.
"It's stating the obvious that many European banks would not survive having to revalue sovereign debt held on the banking book at market levels," he said.
Deutsche has already warned that hitting 6.4 billion euros (US$9.1 billion) in pretax profit for this year was becoming more difficult and required a quick and sustained resolution of Europe's sovereign debts.
The crisis has kept banks hostage to market concerns about their capital strength and access to funding, concerns that were stoked again last week when a European source said the IMF saw a capital gap of 200 billion euros among Europe's banks.
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