How Healthy Is Europe’s Banking Sector?

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July 29 (Bloomberg) –- Stifel Nicolaus Europe Managing Director Otto Dichtl discusses UBS and Deutsche Bank earnings, the health of the banking sector and the impact Russia sanctions will have on banks with Caroline Hyde, Mark Barton and Ryan Chilcote on Bloomberg Television’s “Countdown.” (Source: Bloomberg)

Are joined now.

Good to see you.

Thank you for joining us.

We are talking about deutsche bank and let us start with ubs.

It has been cutting costs.

Your early thoughts?

It is a bit more mixed, i would say.

They beat from cost-cutting efforts and lower charges in the corporate sector.

The runoff is the thing that a bank does when it is in a defensive mode, almost, it you like.

On the other hand, the results are a touch week, i would say.

The revenue generation on growth that you would like to see in a vibrant growth story.

What about the net new money?

We had a net new money outflow that some viewed as a bit of a surprise.

It went up and be as mitt was 8.6 billion.

It is a decent number and, again, the flip side is that the margin is a bit lower again and well below the target that ubs had.

For me and ubs, that is the single most important figure.

That is in the wealth management business.

Will they have issues attracting clients for the wealth management business?

We are going to get russian people close to the russian president.

The u.s. has come out what these blacklists before and they go after the billionaires.

Presumably, they are thinking that it is safe to put their money in a place like ubs when the government come after it.

You think that is an issue for them?

They say they are committed to the russian markets.

First of all, it is a bit of a tricky question and they have a temporary impact.

At the same time, switzerland is not in the eu and it is a traditional advantage of the private banks.

That is what somebody has built a franchise on.

He has made a huge torsion onshore, if you like.

They are the global number one in this business and they are diversified.

Yes, there could be an impact from russian sanctions.

For some time.

I would not expect it to be more significant on the franchise.

It needs to be self sanctioning.

We are seeing trading coming and, in certain volumes, are you impressed by the fact that we have trading up and equity trading?

This is a company that is putting off a lot of big bets on the market.

That is the point.

Deutsche bank was surprisingly robust with the refugee numbers and the area of sales and trading had nice results there.

I think it is a nice set of numbers from deutsche bank in that context and, so, yeah.

We see sentiment shaking and there are concerns about russia.

Will we start to see a market impact and, at the moment, everybody seems to putting geopolitics aside.

It has been quite reluctant.

It is wide ranging and strong sanctions.

We have a few individuals and companies there that's even broader impact.

Banks and deutsche bank would be included, are a little less slow out of the region.

It really has not gone far enough to make you think there is a huge breakdown in the commercial set up in europe at this stage.

The threat remains and it seems to have potential.

So far, the market does not trade it or believe in it.

What about the allegation?

There is uncertainty and the bank admits that the litigation costs are unpredictable.

There is a time of possible impacts.

Forex manipulation and mortgage-backed securities probes.

How much will that continue to weigh on the company.

It weighs on all investment banks.

They are the focus.

It is like an ongoing tax imposed on the bank.

It is there for some time yet.

The market seems to be taking a lot of that on the chin.

I know that deutsche bank is down 19. yeah.

Equity and debt.

In the short-term, i would prefer ubs.

I would probably go with deutsche bank.

The debt is in the investment bank and it is a less important business for them.

They are much more entrenched in that and they say go with deutsche bank.

Once thank you.

This text has been automatically generated. It may not be 100% accurate.


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