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European governments have offloaded more than €16bn of bailed-out bank stocks over the past year, as they seek to draw a line under the long-running effects of the global financial crisis.
A Financial Times analysis of corporate filings and regulatory statements showed that disposals of bank stocks have ramped up over the past 12 months as governments have capitalised on share price surges driven by higher interest rates.
Yet the governments are mostly recouping just a fraction of the taxpayer money they ploughed into their domestic lenders a decade and half ago to save them from collapse.
“The experience of holding stakes in banks has taught governments the importance of cutting losses early, as full recovery of investments might not be realistic,” said Filippo Alloatti, head of financials credit at fund manager Federated Hermes.
Further disposals are expected in the coming months as the Greek and Italian governments are on course to return their large bailed-out banks to the private sector by the end of the year, while the UK and Irish governments could divest their stakes next year.
The sell-offs have created opportunities for banks considering takeovers of their rivals. This week UniCredit bought a 4.5 per cent stake in Commerzbank from the German government for €702mn, adding to a holding it already had in the bank and raising its stake to 9 per cent.
UniCredit chief executive Andrea Orcel said this week the stake-building could lead to a full-on takeover approach, echoing a similar move on Greek lender Alpha Bank last year, where UniCredit bought the government’s 9 per cent stake for €293mn.
The Greek government, which injected €50bn into its four largest lenders to prop them up during the country’s long-running debt crisis, has raised more than €1.7bn over the past year by selling out of Alpha Bank, Eurobank and Piraeus Bank. It has also sold €1bn of stock in National Bank and is expected to sell off its remaining 18 per cent stake in the business in the coming weeks.
The biggest seller over the past year has been the UK Treasury, which has offloaded £5.5bn (€6.5bn) of stock from NatWest and reduced its stake from 38.5 per cent to just under 18 per cent since December.
The UK government injected £45.5bn into NatWest — then known as Royal Bank of Scotland — and took an 84 per cent stake in the business in two bailouts in 2008 and 2009. Since then, it has gradually been selling down its holding and receiving dividends. Its remaining 18 per cent stake is worth around £5bn.
Other countries to have sold down their stakes include the Netherlands, where the Dutch government last week sold €1.2bn of stock in ABN Amro, though it retains a 40.5 per cent stake in a bank it spent €22bn bailing out in 2008.
The Irish government has also raised €2.6bn over the past 12 months by reducing its stake in AIB, which received €21bn of taxpayer support, from 46 per cent to 22 per cent.
And the Italian finance ministry has reduced its stake in Monte dei Paschi di Siena from 64 per cent to 27 per cent since November, raising €1.6bn, and could divest its remaining stake by the end of the year.
European banks have seen their profits turbocharged in the past three years on the back of surging interest rates. Banks generate profits on the difference between the interest they receive from borrowers and pay out to depositors. These profits increase when interest rates rise.
The Euro Stoxx Banks index, which tracks the continent’s biggest lenders, has risen nearly 30 per cent over the past year.
Yet even as the European Central Bank has started cutting interest rates, some analysts predict lenders’ share prices will continue to rise.
“We believe bank equities remain too cheap and will gradually earn a re-rating higher as profitability gains are proven to be more sustainable than the market currently assumes,” said Andrew Stimpson, an analyst at Keefe, Bruyette & Woods.
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