Zadornov called "chronic patients" among European banks

Following Credit Suisse, other European banks, such as the Italian Monte dei Paschi di Siena and the German Commerzbank, may experience problems, Mikhail Zadornov admitted. Unlike the USA,in Europe it is more difficult to merge banksMikhail ZadornovMikhail ZadornovMikhail ZadornovMikhail ZadornovMikhail Zadornov

Saving the second Swiss bank Credit Suisse from bankruptcy by joining the UBS group did not reduce the risks in the banking system of Europe, says economist, ex-head of the Otkritie group Mikhail Zadornov. In a column for RBC, he allowed the emergence of financial problems in large banks in other European countries, as well as the consolidation of the sector in the US, where this is easier to do than in Europe.

“Credit Suisse was the weakest European bank, but there are others in the region. There is the Italian Monte dei Paschi di Siena, which should have been attached to someone ten years ago; Commerzbank is in a very weak position. Today, all “chronic patients” in the European banking market are at risk of being admitted to intensive care with a not always guaranteed positive outcome, ”says Zadornov.

He points out that the crisis of confidence of depositors and investors creates liquidity problems primarily for those players who regularly show weak financial results or have an unbalanced asset structure and a tendency to one-time large losses.

What kind of banks

Monte dei Paschi di Siena is the oldest bank in the world, operating since the 15th century. After the global crisis of 2008, he regularly recorded losses, at the end of last year, losses amounted to €205 million (.pdf).

In contrast, the German Commerzbank showed a profit of €1.4 billion in 2022 against €430 million a year earlier, although for this it had to close branches and reduce staff. Bank CEO Manfred Knough called last year's results a success.

In March, three banks in the US closed within one week, including Silicon Valley Bank (SVB), which ranked 16th in terms of assets in the system. The bankruptcy of credit institutions led to a drop in the capitalization of the banking sector in the US, Europe and Asia, as well as liquidity problems for some players. In particular, the Swiss Credit Suisse was forced to request a $54 billion loan from the Swiss National Bank to stabilize the situation, but this did not stop the outflow of deposits. Subsequently, the bank was acquired at a deep discount by its competitor UBS, the deal was supported by the Swiss regulator.

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The ex-head of Otkritie predicts consolidation in both the European and American banking markets, although these processes, in his opinion, can take place in different ways.

“There are almost 5 thousand banks in the USA. Now investors will run away from the regional ones. These players will be forced to merge or close, there will be consolidation. In Europe, it is needed even more than in the States, but there is another problem: unlike the United States, there is a single European market and a European regulator, but in reality banks are regulated by national laws. Nobody wants to lose the “national champion” in their local banking market, and even let foreign managers get into sensitive client information,” Zadornov notes. He believes that new decisions on the merger of large banks can be made within the next year.