European banks have already raised $115 billion from investors to replenish capital after reporting $134 billion in writedowns, Goldman analysts led by Christoffer Malmer said in a note to clients on today. They may now seek more than ¤60 billion to increase their Tier 1 capital, a measure of financial strength, to about 9 percent, the analysts said. They could need to raise as much as ¤90 billion were credit losses to rise to levels last seen in the recession of the early 1990s. |
"Regulatory pressures and a sharp turn in the European credit cycle are the two main causes for concern," the London- based Goldman analysts wrote in their note.
The European banks Goldman tracks have lost $900 billion of their market value since the credit crisis began last year. Anshu Jain, head of global markets at Deutsche Bank AG, said this week that contagion is "by no means over," and Europe's banks have lagged behind the US in raising money from investors.
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The Goldman analysts cut their recommendations on Carnegie & Co and Swedbank AB of Sweden to "sell" from "neutral." Banco Santander SA, Spain's largest bank, was downgraded to "neutral" from "buy."
Goldman's analysts said in their report that "access to liquidity, capital adequacy and post-crisis profitability are the key areas of near to medium-term uncertainty" for European banks.
Global financial stocks have led declines that wiped about $11 trillion from equity markets worldwide this year. Credit- related losses, surging oil prices and rising inflation have also stoked concern policy makers will have to raise borrowing costs as the global economy slows.
Separately, Credit Suisse Group AG had its price estimate cut by Citigroup Inc earlier today, which also reduced its expectations for earnings-per-share at Switzerland's second- largest bank.