The Choppy Rehabilitation of European Financial Institutions One Year After the Collapse of Credit Suisse
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A year ago, the financial institution Credit Suisse was on the verge of going bankrupt, which resulted in the shares of European banks falling to an all-time low and the cost of insurance against default skyrocketing.

Despite the turmoil that has been occurring among regional banks in the United States, investors have expressed concerns about the stability of lenders.

The intervention brought about by UBS, which was led by the state, was successful in restoring stability to the struggling Swiss peer. A remarkable resurgence has taken place in European banks despite the fact that it has been somewhat delicate. These banks have achieved profits that have never been seen before and have witnessed substantial increases in their stock values.

In this guide, you will find visual representations that illustrate the path toward healing and a few potential obstacles that may manifest themselves along the way.

Stocks Go Up

In March of last year, European bank stocks experienced a significant decline. Shares of Deutsche Bank plummeted by over 20% for the month, while the European banking index had its most challenging month since the onset of the pandemic.

Share prices have surged, driven by a remarkable 60% increase for UBS and an impressive nearly 70% rise for UniCredit. Shares of BNP Paribas (OTC:BNPQY) and Deutsche Bank have not performed as well as expected, but they have still managed to make gains.

The STOXX Europe 600 banks index has been on an upward trend for five consecutive months, reaching its peak in 2019.

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Increasing Earnings

Driving the economic revival has been the resurgence in bank profitability, primarily supported by elevated interest rates that have bolstered banks’ net interest income – the disparity between the funds banks pay for deposits and the earnings they generate from loans.

Santander (BME:SAN), UniCredit, and British banks such as NatWest have all seen a surge in profits due to increased net interest income. Numerous companies have distributed substantial dividends and repurchased their shares.

However, with interest rates reaching their highest point, experts predict that income earnings will level off and subsequently decline.

Recovery of the AT1

The buzz around Additional Tier 1 bonds intensified when Credit Suisse bonds worth a staggering 16 billion Swiss francs ($18 billion) were entirely written off in connection with the UBS rescue.

Several bank AT1 bonds experienced a significant drop in price, with some falling below 80 and even 60 cents on the euro towards the end of March. The AT1s of major financial institutions have experienced a significant rebound.

Worries regarding the vulnerability of commercial property have caused the prices of certain bonds from specialty German banks to drop significantly once again in the current year. The Deutsche Pfandbriefbank and Aareal AT1 bonds have been particularly affected.

Flaw in the Property

Commercial real estate poses a potential vulnerability for banks, as prices experience a significant slowdown due to soaring vacancy rates and the added burden of higher borrowing costs on developers with existing debt.

European banks have a combined exposure of 1.4 trillion euros ($1.5 trillion). As reported by S&P Global, the total holdings of European banking institutions, excluding Britain, reached an astounding 28 trillion euros in the previous year. This impressive figure excludes the United Kingdom.

According to analysts at Morgan Stanley, European banks have decreased their involvement in commercial property and are capable of enduring any additional price decline. However, specific lenders may still have higher levels of exposure.

Mergers and Acquisitions Are Nowhere to Be Found

UBS’s transaction with Credit Suisse was the largest merger in the banking industry since the economic meltdown of 2008, and it was a significant milestone in the industry. During that period, a number of financial institutions in Europe and the United States felt obligated to participate in extraordinary mergers.

In recent years, there have been a limited number of major acquisitions and mergers among banks located in central Europe, particularly regarding transactions that take place across international borders.

According to executives and investors, challenges to collaborations have left European lenders in a more delicate condition than their currently dominant American counterparts.

Peter Bergman (

By Peter Bergman (

Peter Bergman is an experienced financial writer with a passion for helping people achieve financial freedom. With over a decade of experience, he has written extensively on topics ranging from personal finance to investment strategies, and his work has been featured on and other leading financial websites.

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