Intesa and UniCredit Lead European Banks Lower on ECB PlansFabio Benedetti-Valentini
Intesa Sanpaolo SpA and UniCredit SpA, Italy’s biggest lenders, led European banking stocks lower after the European Central Bank failed to provide details on a plan to buy securities that were designed to unlock lending.
The benchmark STOXX 600 Banks Index closed 3.3 percent lower, the biggest decline since June 2013. Intesa Sanpaolo fell 5.5 percent in Milan while UniCredit dropped 4.8 percent. Banco Popolare SC, Italy’s No. 4 lender by assets, was the worst performer on the index, decreasing 6.2 percent.
European banks were pushed lower after ECB President Mario Draghi said in Naples, Italy, today that the central bank will start buying covered bonds this month and asset-backed securities by the end of of the year. He left open the question of whether to carry out large-scale purchases of sovereign debt, or quantitative easing, to bolster the economy.
“The ECB refrained from answering two important questions on the ABS and covered bond purchasing programs: Will there be a country distribution and what will be the total volume?,” Carsten Brzeski, an economist at ING-DiBa in Frankfurt, said in a note to clients. “All measures are aimed at supporting the supply side of the credit economy, i.e. banks.”
Banks in Germany, France and Spain also fell. Societe Generale SA decreased 5.1 percent, while BNP Paribas SA slipped 3.5 percent. Commerzbank AG dropped 5.2 percent and Deutsche Bank AG fell 3.2 percent. Banco Santander SA slid 3.9 percent.
The purchase program is part of an easing plan Draghi has said will steer the balance sheet back to levels seen at the start of 2012, signaling as much as 1 trillion euros ($1.3 trillion) in assets could be added. Since June the ECB has cut interest rates twice and announced a range of measures such as loans to banks aimed at boosting credit to the real economy.
“Initially at least, the markets seem underwhelmed by the ECB’s latest words and actions, with the apparent failure to move any nearer to QE,” said Howard Archer, chief European economist at IHS Global Insight Ltd. in London in an e-mailed note. “Eventual full-blown QE certainly cannot be ruled out.”