European banks struggle on with low interest rates
10 February 2016 London
Image: Shutterstock
Low to negative interest rates are causing a slump in European banking share prices but are failing to stimulate bearish attitudes towards them, according to Markit.
The decline of financials has “accelerated at nearly twice the pace that is seen in across the broader European market”, as gauged by the iShares Stoxx 600 Europe Banks, which is down by “a staggering 20 percent year to date, twice that of its broader full index peer”, according to Markit’s analysis.
The 73 financial exchange-traded funds (ETF) listed in Europe have seen major outflows since the start of the year, with net withdraws approaching the $1 billion mark year-to-date.
Assets under management from these ETF funds have shrunk by over $2 billion—more than 15 percent of 2015’s year-end total, according to Markit.
Despite poor market performance, short selling interest in Europe has stayed below the wider market average.
On average, banks have just 1.5 percent of shares out on loan, one-third less of that of the average for Stoxx 600 constituents, which stands at 2.6 percent.
Markit’s data highlights that this gap shows no signs of closing as demand to borrow the stocks of banks in Europe has increased by 9 percent in the past 12 months, while the rest of the market has seen a 33 percent increase in short interest.
The low shorting demand revolved around periphery banks such as Italian, Portuguese and Spanish banks.
Only three European banks currently have short interest of more than 5 percent of shares outstanding.
The decline of financials has “accelerated at nearly twice the pace that is seen in across the broader European market”, as gauged by the iShares Stoxx 600 Europe Banks, which is down by “a staggering 20 percent year to date, twice that of its broader full index peer”, according to Markit’s analysis.
The 73 financial exchange-traded funds (ETF) listed in Europe have seen major outflows since the start of the year, with net withdraws approaching the $1 billion mark year-to-date.
Assets under management from these ETF funds have shrunk by over $2 billion—more than 15 percent of 2015’s year-end total, according to Markit.
Despite poor market performance, short selling interest in Europe has stayed below the wider market average.
On average, banks have just 1.5 percent of shares out on loan, one-third less of that of the average for Stoxx 600 constituents, which stands at 2.6 percent.
Markit’s data highlights that this gap shows no signs of closing as demand to borrow the stocks of banks in Europe has increased by 9 percent in the past 12 months, while the rest of the market has seen a 33 percent increase in short interest.
The low shorting demand revolved around periphery banks such as Italian, Portuguese and Spanish banks.
Only three European banks currently have short interest of more than 5 percent of shares outstanding.
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