Tag Archives: Bailout

PIIGS, dirty or pata negra markets?

It is already a bit long time since the beginning of the (still) current financial crisis, when Lehman Brothers declared on bankruptcy and panic rushed into the stocks exchanges. The wave, or much better tsunami, affected deeply all the world, but southern European countries and Ireland (the celtic tiger) suffered the hardest consequences: Portugal, Ireland and Greece were bailed out, Spanish banking system was also bailed out and Italy stood close but finally avoided a troika indirect government.

The acronym PIIGS, from the initials of these countries, emerged again, pointing them contemptuously. Their stocks exchanges experienced a big fall of, at least, two thirds of their value from the highest point to the lowest, as our table shows. All of them presented cheap prices. After the worst part of the crisis, PIIGS show now positive signs in their economies and capital flow again, but prices are still cheap.

MARKET

HIGHEST(2007) LOWEST(2012) DIF. % CURRENT(YESTERDAY)

DIF. % VS. HIGHEST

Spain

15.945,70

6.065,00

- 62%

9.982,70

- 37%

Portugal

13.657,70

4.512,27

- 67%

6.928,19

- 49%

Italy

44.364,00

12.895,00 *

- 71%

19.682,82

- 55%

Greece

5.334,50

485,18

- 91%

1.260,17

- 76%

Ireland

9.968,48

1.916,38 *

- 81%

4.802,82

- 52%

* Lowest in 2009. Sources: Historical indexes charts and T-Advisor compilation

Last year was quite good in PIIGS markets, with a high performance in Spain and Italy, for instance, but the trend keeps on, as the Global Market tool in T-Advisor show. These are the six more bullish markets last week:

PIIGS: Six top bullish markets by T-Advisor

This result repeated in January: Spain and Portugal were the whole month in the top 3 and Italy amongst the 5 more bullish. “PIIGS can fly”, said recently an analyst quoted by AFP, although the sentence is not new, as some comments focused already in that way last October. However, uncertainty remains in these countries. Portugal and Greece are still indirectly ruled by the troika, while Italian and Spanish growth outlooks are still weak. In any case, investment trends detected by T-Advisor tools show that PIIGS markets were in January, at least, pata negra.

European banks: new landscape after the crisis

European banks: Image of the euro symbol in front of the seal of the ECB

European banking sector changed deeply in the last years as a result of the long crisis since 2007. The branch experienced a lot of different events, such direct recapitalizations and nationalisations. Nobody could have bet for it before 2007, but the banking landscape in Europe is quite different.

ECB figures show this dramatic change. From 2008 to 2012, almost 600 banking institutions disappeared and assets dropped 12%. The peak of the restructuration process took place in 2009. Mergers and resolutions finished, for instance, the savings’ bank sector, which had 50% of the market in Spain.

It seems that it happened long time before, but we should not forget the nationalisations of ING in Holland or Hypo Real Estate in Germany happened three or four years ago, just to point two cases in which countries were not intervened by the troika. In the bail-out side, Spain needed €40 bn to recapitalized four banks, amongst them Bankia. Now, Spain and Ireland seem to be at the end of the bailout programme.

European banks have to deal now with new regulations. Not only Basel III capital requirements will influence in the balances and future bank investments, but also the next European single supervisor. ECB is going to repeat the stress tests for the banking sector and, although there is more confidence than before, some investors still have some doubts about the capital strength of the branch.

One of the most important trends in the European banking sector is the concentration. Following the ECB, big banks have a bigger market share, amongst them in Germany, Italy and Spain. European bank ranking by assets shows that UK, Germany and France are at the top.

The question now is the real strength of European banks. Are they a good business in the stock markets? As the European Banking Authority stated, there is still uncertainty about the quality of banks’ assets and valuation, because of the loans lent to companies and building sector. It is just a question of time to discover the real truth for investors.