CORPORATE CAPITAL PAN-EUROPEAN BANKS THE BASEL III GAME CHANGER • We initiate on the 10 largest European ‘lending’ banks: BBVA, DNBNOR, Handelsbanken, HSBC, Intesa, Lloyds, Nordea, Santander, Standard Chartered and Unicredit. • The Basel Committee proposals (which we tentatively call ‘Basel III’) are likely to be a game changer for the banks. This is a key part of our report. We see Lloyds and HSBC’s Core Tier 1 ratios falling substantially, to 4.4% and 6.0% respectively. We see other banks as adequately capitalised, with the three Nordic banks having considerable excess capital. • We are positive on the group as a whole. Economic growth is likely to surprise on the upside and we foresee the yield curve remaining steep for a prolonged time. Research Andrew Lim +44 20 3206 7347
[email protected] 19TH JANUARY 2010 THE BASEL III GAME CHANGER We believe that changes in bank capital regulations are going to be a ‘game changer’ for the sector. In our initiation report on large cap European lending banks, we undertake a detailed analysis of what would happen to banks’ capital ratios. We reach some startling conclusions, most notably that Lloyds’ Core Tier 1 ratio falls to 4.4% and HSBC’s falls to 6.0%. Other banks are seen to be adequately capitalised, with Nordic banks in particular having excess capital. • We initiate coverage on the large cap European • In our Sector and Economic Overview, we retail and corporate lending banks (which we broadly conclude that the lending banks are operating in a term ‘lending’ banks) for whom the vast proportion of very attractive economic environment which is likely operating earnings is derived from plain-vanilla to last until at least Q4 2010.