Jul
20th
Mon
20th
On European Banks
As usual, great weekly newsletter from John Mauldin titled “Europe on the brink”, in partnership with Hayman Capital.
Did you know that …
- Leverage of banks is higher in Europe than the US: 55x vs 45x in Assets over Tangible Common Equity and even more worryingly, 12x vs a stunning 33x in Assets over Common+Preferred Equity. If asset value fall by a mere 3%, then European banks’ shareholders will be swiped away.
- Swiss banks have even higher leverage: their assets are 70x Tangible Common Equity and 45x Common+Preferred Equity. A 2% extra loan losses would swipe away all equity.
- Financial system in Europe is a much bigger slice of the economy: US bank assets are only 2x US GDP. Switzerland and Ireland are over 7x, the UK is over 5x, and the Eurozone is at 4x. So loan losses of 5% represent 20% of Eurozone GDP.
