Banking Crisis
Who Gains, Who Loses As Greece Stumbles Towards Ruin? Asks Berenberg

Some banks, in the medium term, appear in better shape than others to weather Greek-associated storms, argues Berenberg in a note.
Banks able to focus on risk-adjusted returns and which are
therefore best able to deliver sustainable cash dividends are the
long-term winners out of the eurozone turmoil, according to
Germany-headquartered private bank and investment house Berenberg.
Those banks, the firm said in a report, are Handelsbanken, HSBC,
ING, Nordea, Swedbank and UBS.
In its latest note on the eurozone’s debt crisis and the problems
of Greece, Berenberg said that events unfolding in Greece, such
as its voters’ rejection of a eurozone bailout package and
conditions, “reinforce the structural bear case we have long
articulated on European banks: that the end of the debt
supercycle, with interest rates lower for longer and ever tougher
regulation, will cap bank returns on equity at 8-9 per cent”.
“This [outcome] will disappoint both the market and the boards of
banks. Ultimately, bank business models are based on arbitraging
the price of money across time and across markets. The more
markets Balkanise (and quantitative easing persists), the fewer
profitable opportunities there are; that is the real takeaway
from events in Greece,” Berenberg continued.
“We believe the key to understanding the impact of the Greek
referendum for European banks lies in the bigger picture: 1) debt
burden remains key: Greece, like Puerto Rico in the US (and
China?), shows that the fallout from the end of a 60 to 70-year
debt supercycle is far from over. Greece is but a symptom of a
much larger problem; it is not an isolated case,” it said.
The firm said that European institutions are “not permanent” and
noted how it took a non-European in the person of William Dudley,
president of the New York Fed, to point this out recently.
The notion, once floated in policy circles, of a European banking
union is “dead”, Berenberg said.
“During negotiations with Greece, euro-area politicians showed a
preference for their own national interests. Therefore, how can
true banking union ever exist? Such a union requires a single
rule book/supervisor, a single resolution/bail-in mechanism and a
single deposit scheme,” it said.
A damning feature of recent events, Berenberg continued, is that
Greece’s Alpha Bank had passed a set of stress tests with “flying
colours” eight months ago but could be destroyed if the European
Central Bank cuts off liquidity.