Magazine article American Banker

Little Relief in Sight as Recession Hurts Profits

Magazine article American Banker

Little Relief in Sight as Recession Hurts Profits

Article excerpt

A deepening recession across Europe is wreaking havoc with banks' profits.

Bankers and analysts say they see little hope for improvement until interest rates fall further and bank lending margins improve.

"It's well understood that banks have been under pressure," says Marc Vienot, chairman of France's Societe Generale.

"Europe is still in a very pessimistic mood, and it's very hard for one country or the other to do something on its own."

|Trying to Limit Losses'

"It's kind of a grin-and-bear-it year, and banks are trying to limit losses, control costs, and look forward to some recovery next year," says Matthew Czepliewicz, a banking analyst with CS First Boston in London.

"There's not a lot positive in general terms, and you're looking at very modest lending, revenue, and asset growth and some improvement in spreads as interest rates decline."

The economic downturn comes as cash-short governments in several European countries are seeking to sell off the stakes they hold in big banks.

The fall in profits as a result of bad real estate and corporate lending is affecting some of Europe's biggest banks.

But with profits falling and provisions for bad corporate and real estate loans rising. it could take a lot longer than planned to privatize the remaining government-owned banks.

Credit Lyonnais, one of the world's biggest banks, with $350 billion of assets, lost $316 million last year after earning $562 million a year earlier.

Barclays First Loss

Banque Nationale de Paris, with $284 billion in assets, earned $380 million last year, down from $515 million a year earlier.

Barclays Bank PLC, Britain's largest commercial bank, with $225 billion of assets, announced a $515 million loss last year, the first in its 97-year history.

Trouble in Sweden

The bank's chairman, Andrew Buxton, said there is little reason to believe that Britain's economy will improve soon. …

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