SNL FINANCIAL: RISING TO THE BASEL III CET 1 RATIO CHALLENGE IN Q1 

Europe’s largest banks continued to make progress on Basel III capital requirements in the first quarter of 2014, as an SNL analysis shows.

On our list of top Basel III improvers, Alpha Bank AE revealed the highest capital ratio rise, growing 210 basis points since theend of 2013. The Greek bank posted a fully loaded common equity Tier 1 ratio of 12% at March 31, up from 9.90% at the end of 2013.

€1.2 billion capital increase in the first quarter allowed the bank to bolster its capital position and help its tangible common equity reach €8.29 billion from €7.13 billion at the end of last year. The company used the proceeds of the common stock sale to pay back €940 million in Basel III noncompliant preferred stock held by the Greek government, according to a May 29 investor presentation.

Another notable bank on our list is UBS AG. The Swiss bank’s fully loaded Tier 1 common equity ratio jumped 40 basis points quarter over quarter ending at 13.20% at March 31, according a May 6 earnings release, after continuing to focus on shrinking its balance sheet in the first quarter, cutting CHF36 billion in assets. This followed a strong 2013, when the company increased its fully loaded common equity Tier 1 ratio by 300 basis points year over year.

Meanwhile, riding on the success of its streamlining initiative, Lloyds Banking Group Plc managed to both cut costs and drive profits to £1.16 billion during the first quarter. The U.K. bank also reduced wholesale funding by £7.6 billion and increased deposits by £5.3 billion, according to its May 1 earnings release. Lloyds’ first-quarter common equity Tier 1 ratio was 10.80%, up 80 basis points since the end of 2013.

Over at BNP Paribas SA, the French bank’s Basel III common equity Tier 1 ratio increased to 10.60% as of March 31, up 30 basis points quarter over quarter. In its first-quarter earnings release, the company noted that higher retained earnings accounted for 16 of those basis points, while an appreciation of available for sale securities and a decline in risk-weighted assets accounted for the rest. BNP Paribas expects the ratio to be around 10% for the second quarter, following a $8.97 billion penalty imposed by U.S. authorities on the company for violating sanctions against regimes like Sudan and Iran, according to a July 1 investor call transcript.

At the other end of the spectrum, Portugal-based Banco BPI SA‘s common equity Tier 1 ratio fell 150 basis points during the first quarter, ending at 9.70% on March 31, the biggest drop among the banks in SNL’s analysis. The company redeemed €500 million in contingent convertible bonds in the quarter, according to an April 23 earnings release. Later, on June 25, BPI announced that it had redeemed the remaining €420 million.

A few banks have already reported second-quarter common equity Tier 1 ratios. That includes Skandinaviska Enskilda Banken AB, which reported that its ratio climbed 30 basis points in the second quarter to 16.00%. Another Nordic bank, DNB ASAincreased its common equity Tier 1 ratio by 20 basis points quarter over quarter to 14.40%.

 

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