European G-SIBs Monitor Q2 2022 - Ready For The Next Challenge Business diversification and adequate buffers support high creditworthiness in an ...
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European G-SIBs Monitor Q2 2022 Ready For The Next Challenge Business diversification and adequate buffers support high creditworthiness in an uncertain environment This report does not constitute a rating action May 12, 2022
Key Takeaways
1. Diverging Business Strategies 2. Solid Post-Pandemic Prospects 3. Adequate Buffers
European G-SIBs benefit from their European G-SIBs have come out of the European G-SIBs maintain broadly
business and geographic pandemic largely unscathed, although adequate capital, liquidity, and funding
diversification, which underpins their some more than others. We expect buffers – with a few positive outliers. In
elevated stand-alone credit profiles overall financial performance to remain addition, substantial ALAC buffers
(SACPs). However, divergences in their solid but unspectacular in 2022-2023, provide further credit protection to
business strategies are a key with rising rates likely to offset an senior bondholders – and therefore
differentiating factor. uptick in costs and moderating rating uplift - for all but one bank.
business growth.
– The Financial Stability Board has classified 13 European banks as global systemically important banks (G-SIBs); these banks are based
in seven countries and carry out banking business internationally.
– European G-SIBs' large size and relative complexity draw particular attention from regulators. Also, these banks tap global investors
for funding purposes and compete with one another (and other international G-SIBs) for international corporate banking and capital
markets business. They also tend to hold large shares of their domestic or selected international retail and corporate markets.
– For all these reasons, S&P Global Ratings considers European G-SIBs to be natural peers. Here, we compare their credit profiles and
provide an overview of the main credit trends affecting them.
S&P Global Ratings 2Overview Of European G-SIB Ratings
– All European G-SIBs, except Deutsche Bank, have SACPs at their anchor or higher, reflecting the strength of their idiosyncratic credit
profiles.
– All banks except UniCredit benefit from one to two notches of uplift due to additional loss-absorbing capacity (ALAC), since we
consider the resolution regimes in their home countries to be effective.
– Credit Suisse is the only bank in the group with a negative rating outlook, while Barclays and UniCredit have positive rating outlooks.
Anchor Business position Capital and earnings Risk position Funding & liquidity CRA SACP Support type Rating/outlook*
HSBC bbb+ Strong (+1) Adequate (+0) Strong (+1) Strong/Adequate (+0) 0 a ALAC A+/Stable
BNP Paribas bbb+ Very strong (+2) Adequate (+0) Adequate (+0) Adequate/Adequate (+0) 0 a ALAC A+/Stable
Credit Agricole bbb+ Strong (+1) Adequate (+0) Strong (+1) Adequate/Adequate (+0) 0 a ALAC A+/Stable
Banco Santander bbb Very strong (+2) Adequate (+0) Strong (+1) Adequate/Adequate (+0) 0 a ALAC A+/Stable
UBS a- Strong (+1) Strong (+1) Moderate (-1) Adequate/Adequate (+0) 0 a ALAC A+/Stable
ING bbb+ Strong (+1) Strong (+1) Adequate (+0) Adequate/Adequate (+0) 0 a ALAC A+/Stable
BPCE bbb+ Adequate (+0) Strong (+1) Adequate (+0) Adequate/Adequate (+0) 0 a- ALAC A/Stable
Standard Chartered bbb+ Adequate (+0) Adequate (+0) Adequate (+0) Strong/Strong (+1) 0 a- ALAC A+/Stable
Credit Suisse a- Adequate (+0) Strong (+1) Moderate (-1) Adequate/Adequate (+0) 0 a- ALAC A+/Negative
Barclays bbb+ Adequate (+0) Strong (+1) Moderate (-1) Adequate/Adequate (+0) 0 bbb+ ALAC A/Positive
Société Générale bbb+ Adequate (+0) Adequate (+0) Adequate (+0) Adequate/Adequate (+0) 0 bbb+ ALAC A/Stable
Deutsche Bank bbb+ Adequate (+0) Adequate (+0) Moderate (-1) Adequate/Adequate (+0) 0 bbb ALAC A-/Stable
UniCredit bbb Strong (+1) Adequate (+0) Moderate (-1) Adequate/Adequate (+0) 0 bbb - BBB/Positive
*Long-term issuer credit rating and outlook on the operating company. ALAC--Additional loss-absorbing capacity. SACP--Stand-alone credit profile. CRA--Comparable Ratings Analysis (CRA) adjustment.
S&P Global Ratings 3Diverging Business
Strategies
European G-SIBs benefit from their business and geographic
diversification, which underpins their elevated stand-alone credit
profiles. However, divergences in their business strategies are a key
differentiating factor.
S&P Global Ratings 4Business And Geographic Diversification Is A Key Source Of Credit Strength
For European G-SIBs
Key Strategic Differentiators: Geographic And Business Diversification
– Most European G-SIBs are large, diversified
universal banks but with varying degrees of 90%
international presence. Most focus on International wealth
Wealth
UBS
expansion in Europe, except for HSBC and 80% management and
investment banking management
Noninterest income / operating revnues
investment
Standard Chartered, which have a strong Credit Suisse banking
70%
footprint in Asia-Pacific. Universal banks
Barclays
– Other European G-SIBs pursuing 60% BPCE
BNP Paribas Standard Chartered
international strategies do so through a Societe Generale Deutsche Bank Universal
narrower set of activities: mainly lending for 50%
HSBC
banks
Santander and ING, and wealth Credit Agricole UniCredit
40%
management and investment banking for
International
Credit Suisse and UBS. 30%
lenders Banco Santander Lending
business
– Most European G-SIBs have leading ING
20%
positions in their home markets, such as 0% 10% 20% 30% 40% 50% 60%
Credit Agricole and BPCE in France, and Domestic and European bias index
Barclays in the U.K. National Pan-European Global
players banks presence
Note: Bubble size reflects total assets in euros. Data as per year-end 2020. Domestic and European Bias Index is a weighted average of the lending book exposure
split between non-domestic European (40%) and non-European international exposures (60%). Higher values indicate greater international diversification.
Geographic exposure split is rounded to nearest 5% and grouped where necessary according to paragraph 36 of S&P Global Ratings’ methodology for rating financial
institutions.
S&P Global Ratings 5Geographic Exposures Are The First Rating Differentiator
The Geographic Split Of Business Has A Direct Bearing On The Relative
– The majority of European G-SIBs (nine of
13) have an anchor of 'bbb+' -- similar to Positioning Of The Anchor, The Starting Point Of Our Ratings
WAER share (%)
U.S. G-SIBs.
HSBC (bbb+) UK Hong Kong APAC N. America EU Rest of world
– The Swiss G-SIBs (UBS and Credit Suisse)
BNP Paribas (bbb+) France Europe Italy US Belgium Rest of world
are positive outliers, with 'a-' anchors
reflecting the strength of their home Credit Agricole (bbb+) France EU ItalyN. America Rest of world
jurisdiction and the fact that the anchor is Banco Santander (bbb) Spain Europe US Brazil LatAm
calculated based on the distribution of UBS (a-) Switzerland N. America Europe APAC
lending exposures. ING (bbb+) Netherlands Germany Belgium EU ESE Rest of the world
– Santander and UniCredit, on the other BPCE (bbb+) France EU World N. America
hand, have 'bbb' anchors, reflecting Standard Chartered (bbb+) UK Hong Kong Korea China US Rest of the world
relatively higher economic risk in Italy for Credit Suisse (a-) Switzerland US Europe APAC UK
UniCredit and, for Santander, the bank’s
Barclays (bbb+) UK US World EU Germany
presence in relatively riskier jurisdictions.
Societe Generale (bbb+) France Europe N. AmericaWorld MENA
Deutsche Bank (bbb+) Germany US EU World APAC
UniCredit (bbb) Italy Germany Austria ESE
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Letters in brackets indicate the anchor. ESE--Eastern and Southern Europe. MENA--Middle East and Northern Africa. APAC--Asia-Pacific. WAER--Weighted Average
Economic Risk. Source: S&P Global Ratings.
S&P Global Ratings 6Lending Is Less Than Half Of Business, For Most
– Customer loans represent only around one-third of total assets for most European G-SIBs. Santander, ING, and BPCE are clear outliers
with more traditional banking balance sheets.
– This asset diversification in turn partly explains the disparities in revenue splits: Universal banks derive 40%-50% of revenue from non-
interest income while, for international lenders, this is only 30%. UBS and Credit Suisse are clear outliers because their focus on
wealth management (and investment banking) leads to non-interest income representing 70%-80% of total revenue.
Distribution Of Total Assets (%) Distribution Of Operating Revenue (%)
Cash and MMI Customer loans Securities Insurance Derivatives Other Net interest income Noninterest income
HSBC (a) 21% 35% 22% 5% 10% 7% HSBC (a) 51% 49%
BNP Paribas (a) 23% 32% 14% 11% 12% 8% BNP Paribas (a) 43% 57%
Credit Agricole (a) 13% 43% 8% 22% 7% 7% Credit Agricole (a) 53% 47%
Banco Santander (a) 17% 56% 15% 5% 6% Banco Santander (a) 68% 32%
UBS (a) 23% 34% 18% 2% 17% 6% UBS (a) 19% 81%
ING (a) 19% 64% 11% 3%2% ING (a) 74% 26%
BPCE (a-) 15% 51% 12% 14% 4%4% BPCE (a-) 38% 62%
Standard Chartered (a-) 18% 35% 24% 9% 14% Standard Chartered (a-) 47% 53%
Credit Suisse (a-) 27% 36% 23% 3% 11% Credit Suisse (a-) 27% 73%
Barclays (bbb+) 26% 25% 18% 22% 9% Barclays (bbb+) 36% 64%
Societe Generale (bbb+) 22% 30% 15% 13% 12% 9% Societe Generale (bbb+) 42% 58%
Deutsche Bank (bbb) 19% 32% 13% 26% 10% Deutsche Bank (bbb) 44% 56%
UniCredit (bbb) 27% 44% 19% 6% 4% UniCredit (bbb) 51% 49%
Top 100 European banks* 17% 46% 15% 7% 8% 7% Top 100 European banks* 63% 37%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
*Aggregated. Letters in brackets indicate stand-alone credit profiles (SACP). Data as of year-end 2020. Customer loans net *Median. Letters in brackets indicate stand-alone credit profiles (SACP). Data as of year-end 2021. Source: S&P Global
of provisions. MMI--Money market instruments. Insurance--Insurance Statutory Funds. Source: S&P Global Ratings. Ratings.
S&P Global Ratings 7Diverging Strategies Lead To Universal banking strategy diversification/complexity
trade-off
Risk-Benefit Tradeoffs Although universal banks benefit from diversified – and
therefore more stable – revenue, they need to handle the
Key common credit
strengths
Key common credit risks complexity created by their size and reach. A strong risk
Great business and management culture and cost discipline are therefore key.
Global universal geographic Complexity due
Universal banking strategy
banks (like diversification but to the size and
HSBC, BNP generally without reach of
Paribas) market-dominant operations Selective international strategy market dominance/
positions Exposure to
capital market volatility trade-off
Higher relative volatility
National or Generally dominant
regional market position and
exposure to International banks enjoy dominant market positions in given
domestic and
universal banks gradual or increasing
European
countries or products, but their relatively narrower business
(like Credit
Agricole, BPCE)
business
diversification
banking focus exposes them to volatility and nonfinancial risks.
constraints Strategic flexibility or pragmatism, as well as strong
compliance culture, are key.
Leading lending Presence in higher-risk
International banking strategy
Int’l lenders
positions in several countries, and sensitivity to the
(like Santander,
markets interest rate environment in
ING)
internationally various countries
All banks idiosyncratic credit strengths and
Leading franchises
in global fee
For wealth management: Higher
cost base for U.S. activities weaknesses
Int’l wealth
businesses (advisor model), and exposure to
mgt/inv.
banking (like
For wealth nonfinancial risks and market Stemming from 1) the historical business position (such as
UBS, Credit
management: conditions Credit Agricole's and BPCE's dominance in French retail) and
capital-light For investment banking:
Suisse)
activities with stable Exposure to capital market 2) the capacity to manage risks stemming from the chosen
revenues volatility business strategy (like Credit Suisse’s risk management and
Source: S&P Global Ratings.
governance issues).
S&P Global Ratings 8Solid Post-Pandemic
Prospects
European G-SIBs have come out of the pandemic largely unscathed,
although some more than others. We expect overall financial
performance to remain solid but unspectacular in 2022-2023, with
rising rates likely to offset an uptick in costs and moderating
business growth.
S&P Global Ratings 9Slower But Still Positive Growth in Earning Assets Expected In 2022 And 2023
Most European G-SIBs Expected to Return To More Moderate, But Still Positive,
– 2020 was an exceptional year by all
Growth In Earning Assets accounts, during which most European G-
Earning assets growth (%)
SIBs saw large increases in earning assets.
2019A 2020A 2021A 2022F 2023F This was fueled by massive fiscal and
15
monetary support from public authorities,
with bank balance sheets acting as key
10 conduits.
– In 2021, earning assets growth returned to
5
average historical trends for most
European G-SIBs – Credit Suisse and
UniCredit were clear outliers, with shrinking
0 balance sheets.
– In 2022 and 2023, we expect earning assets
(5) growth to moderate further, but remain
positive, as the Russia-Ukraine war and its
economic fallout cloud the business
(10)
HSBC BNP Credit Banco UBS ING BPCE Standard Credit Barclays Societe Deutsche UniCredit Top 100
outlook.
(a) Paribas Agricole Santander (a) (a) (a-) Chartered Suisse (a-) (bbb+) Generale Bank (bbb) European
(a) (a) (a) (a-) (bbb+) (bbb) banks*
*Median. Letters in brackets indicate stand-alone credit profiles (SACP). A--Actual. F--Forecast. 2021 may include estimates for European Top 100 Banks that have
not yet reported.
Source: S&P Global Ratings.
S&P Global Ratings 10Earnings Should Hold In 2022 And 2023
After A Couple Of Volatile Years, Profitability Should Stay Broadly Steady In
– Profits have been volatile through the
2022-2023 pandemic due to large credit provisioning in
Return on average common equity (%)
2020, but largely reversed in 2021 on the
2019A 2020A 2021A 2022F 2023F
back of a better-than-expected economic
15
recovery.
10 – For 2022, we expect profitability to stay
broadly stable, with some improvement in
5
net interest margins and an uptick in
provisioning and operational costs. For
UniCredit and Société Générale, our
0
forecasts include significant provisions on
their Russian operations.
(5)
– On the capital markets side, increased
(10)
market volatility drives higher sales and
trading business flows in the short term,
but heightened uncertainty about the
(15)
HSBC BNP Credit Banco UBS ING BPCE Standard Credit Barclays Societe Deutsche UniCredit Top 100 macro-economic outlook and tightening
(a) Paribas Agricole Santander (a) (a) (a-) Chartered Suisse (a-) (bbb+) Generale Bank (bbb) European
(a) (a) (a) (a-) (bbb+) (bbb) banks* financial conditions will weigh on
*Median. Letters in brackets indicate stand-alone credit profiles (SACP). A--Actual. F--Forecast. 2021 may include estimates for European Top 100 Banks that have underwriting business.
not yet reported.
Source: S&P Global Ratings.
S&P Global Ratings 11Limited And Gradual Improvement In Margins
The Downward Trend In Net Interest Margins Should Finally Reverse In 2022
– Rate increases will differ across the world,
And 2023 For Most Banks, But The Rise Will Likely Be Moderate And Gradual with the U.S. and U.K. hiking rates faster
Net interest margin (%)
and further than the ECB, in our baseline
2019A 2020A 2021A 2022F 2023F projection.
3.0
– Most sensitive to increases in rates are
2.5 international lenders with a larger share of
variable-rate loans. The effects should be
2.0 more diluted for universal banks deriving a
significant part of profits from non-interest
1.5
business.
– Also, a faster repricing of deposits (such as
1.0 term deposits) than for assets (like fixed-
rate mortgage loans) means that it would
0.5 take some banks years to fully reap the
benefits.
0.0
HSBC BNP Credit Banco UBS ING BPCE Standard Credit Barclays Societe Deutsche UniCredit Top 100
(a) Paribas Agricole Santander (a) (a) (a-) Chartered Suisse (a-) (bbb+) Generale Bank (bbb) European
(a) (a) (a) (a-) (bbb+) (bbb) banks*
*Median. Letters in brackets indicate stand-alone credit profiles (SACP). A--Actual. F--Forecast. 2021 may include estimates for European Top 100 Banks that have
not yet reported.
Source: S&P Global Ratings.
S&P Global Ratings 12Who Would Benefit Most From Rising Rates
– In their regulatory disclosures, most G-SIBs report that net European G-SIBs Disclose The Impact On NII And EV Of
interest income (NII) would increase if interest rates were Selected Interest Rate Shocks In Their Regulatory Pillar 3
to rise. However, comparison is tricky, since banks' Reports
estimates rely on different modeling assumptions and are
Relative impact Relative impact
subject to different local regulatory requirements. Envisaged IR
on NII in Year 1 (% on EV (% of CET 1
parallel shock (bps)
of NII) capital)
– Overall, U.K.-based G-SIBs (HSBC and Standard Chartered)
HSBC +250 bps† 47% (2%)
would likely benefit the most. Europe-centered G-SIBs
BNPP +50 bps 1% (9%)*
such as Société Générale, UniCredit, and Deutsche Bank
CASA +50 bps 4% (2%)*
would come in a second group. San +200 bps 6% 1%*
– France-centered banks would see more limited upside in UBS +150 bps§ (14%) (10%)
the short term due to the faster repricing of regulated ING +100 bps 2% (12%)*
BPCE +200 bps N.A. (11%)*
deposits than long-term fixed-term mortgages. The
StanChart +100 bps 19% N.A.
effects would likely become more positive over time.
CS +150 bps§ (55%) (3%)
– For UBS and Credit Suisse, the reported negative impact Bar +25 bps 1% (1%)
largely reflects specific regulatory requirements (such as SocGen +200 bps* 2% (-12%)
the exclusion of cash at central banks from NII). DBK +200 bps* 13% (6%)
UCG +100 bps 9% (7%)*
– The theoretical impact of rising rates on equity value (EV) Data as of Dec. 2021. *EBA regulatory shock: 200 bps for EUR, 200bps for USD, 250 bps for GBP.
would remain limited, below the trigger for enhanced §FINMA regulatory shock, incl. +150 bps for CHF, +200 bps for EUR and USD, and +250 bps for
GBP. †PRA regulatory shock: +250 bps for GBP, +200 bps for USD, EUR, HKD N.A.--Not
supervisory dialogue (-15% under the EU regulation). available. Sources: Company reports, S&P Global Ratings.
S&P Global Ratings 13Limited Upside To Cost Efficiency Due To Higher Inflation
We Don’t Expect Significant Further Improvement In Cost Efficiency As Inflation
– In recent years, European G-SIBs have
And Potentially Wage Pressure Start To Bite largely focused on bringing down
Cost to income ratio (%)
operational costs relative to income, with
2019A 2020A 2021A 2022F 2023F
110 some success.
100 – Some banks have successfully undertaken
90 deep restructuring such as Deutsche Bank,
80 HSBC, Standard Chartered, or Société
Générale. For Credit Suisse, these efforts
70
are still ongoing.
60
50
– In 2022/2023, we expect higher inflation to
weigh on operational costs as banks face
40
increasing wage pressure in tight labor
30 markets. We expect investment banking
20 activities to have the most sensitive cost
10 base in this context.
0
HSBC BNP Credit Banco UBS ING BPCE Standard Credit Barclays Societe Deutsche UniCredit Top 100
(a) Paribas Agricole Santander (a) (a) (a-) Chartered Suisse (a-) (bbb+) Generale Bank (bbb) European
(a) (a) (a) (a-) (bbb+) (bbb) banks*
*Median. Letters in brackets indicate stand-alone credit profiles (SACP). A--Actual. F--Forecast. 2021 may include estimates for European Top 100 Banks that have
not yet reported.
Source: S&P Global Ratings.
S&P Global Ratings 14Expected Reversal Of Asset Quality Trend, For Some
After Years Of Improvement, Asset Quality Should Largely Stabilize And May
– Positive asset quality trends in recent years
Even Reverse For Some European G-SIBs have brought European G-SIBs’ metrics
Gross nonperforming assets/customer loans + other real estate (%)
into a relatively narrow range. Differences
2019A 2020A 2021A 2022F 2023F
persist, however, with Swiss banks as
7
positive outliers due to their mainly
collateralized lending.
6
– Lower loan growth and increased
5 delinquencies in selected corporate
portfolios (most affected by higher energy
4
prices or supply shortages) will lead to a
stabilization or marginal reversal of asset
3
quality trends for most G-SIBs. Our credit
2
loss forecasts include the impact of the
credit quality of Russian exposures.
1
– The number of downside scenarios has
increased, however, including the
0
HSBC BNP Credit Banco UBS ING BPCE Standard Credit Barclays Societe Deutsche UniCredit Top 100 possibility of a broad ban on Russian
(a) Paribas Agricole Santander (a) (a) (a-) Chartered Suisse (a-) (bbb+) Generale Bank (bbb) European
(a) (a) (a) (a-) (bbb+) (bbb) banks* energy, which would have a greater impact
*Median. Letters in brackets indicate stand-alone credit profiles (SACP). A--Actual. F--Forecast. 2021 may include estimates for European Top 100 Banks that have on asset quality in Europe.
not yet reported.
Source: S&P Global Ratings.
S&P Global Ratings 15G-SIBs' Q1 Results Confirm Our Trend Forecasts
Key Q1 Results For European G-SIBs
– Q1 revenues were broadly supported
BNP Credit Banco Standard Credit Societe Deutsche
by higher interest rates and elevated
HSBC Paribas Agricole Santander UBS ING Chartered Suisse Barclays Generale Bank UniCredit sales and trading activity.
Net operating
– Most European G-SIBs increased
4% 12% 7% 5% (4%) (2%) 9% (42%) 10% 17% 1% 7%
income credit loss provisions; the significant
year-on-year movement is mainly due
to low base effects in Q1 2021 (HSBC,
Operating
Expenses
(3%) 13% 12% (2%) (5%) (2%) (6%) 26% 5% 12% (1%) (2%) Barclays, and Standard Chartered) or
to higher provisions on Russian
exposures (UniCredit and Société
Credit Loss
Provisions 53% (49%) 65% 3% N.M. >100% >100% >100% N.M. 103% 15% >100% Générale).
– The picture is more mixed on
Net Income
(28%) 19% (21%) 8% 17% (57%) 1% (20%) (15%) 10% 18% (71%)
operating expenses since the impact
After Tax
of higher inflation is not yet fully
embedded.
CET 1 Ratio 170 bps 50 bps 50 bps 18 bps 70 bps 100bps 20 bps 60 bps 130 bps 80bps 41bps 103bps – Regulatory CET 1 ratios were down for
all European G-SIBs, but from
relatively high levels.
Bps--Basis points. N.M.--Not meaningful.
Source: Company announcements, S&P Global Ratings.
S&P Global Ratings 16Adequate Buffers
European G-SIBs maintain broadly adequate capital, liquidity, and
funding buffers – with a few positive outliers. Substantial ALAC
buffers provide further credit protection to senior bondholders – and
therefore rating uplift – for all but one bank.
S&P Global Ratings 17Earnings And Capital Buffers Remain Comfortable, But Are Rarely A Rating
Strength
European G-SIBs Maintain Adequate Capital And Earnings Buffers
– Mostly adequate capital levels underpin
the resilience of European G-SIBs’ credit
200
Median European Top 100 profiles, with UBS and Credit Suisse clear
180 banks: 10.8% positive outliers.
160 Banco Santander UBS – Moderate earnings buffers, which measure
a bank's capacity to cover normalized
140
losses, partly reflect cyclical weaknesses
Earnings buffer (bps)
120 HSBC due to the low-interest-rate environment.
100
Barclays Apart from UBS and Santander, business
Median European Top 100 banks:
79 bps
scale rarely goes above sector
80 performance levels.
Deutsche Bank ING
Credit Agricole
60 UniCredit Credit Suisse
BPCE – For a few, such as BPCE and Credit
Societe Generale
40
BNP Paribas
Agricole, the cooperative status implies
20
higher earnings retention, structurally
Standard Chartered supporting robust capital metrics.
0
7 8 9 10 11 12 13 14 15
S&P Global Ratings’ RAC Ratio before diversification (%)
Note: 2022 Forecast. Bubble size indicates S&P Global Ratings‘ risk-weighted assets relativities. The earnings buffer is S&P Global Ratings‘ measure for an entity‘s
capacity to cover normalized losses though earnings. It is computed as (preprovisioning operating income +/- one-off items included in preprovision income –
normalized credit losses) / S&P Global Ratings‘ risk-weighted assets. Source: S&P Global Ratings.
S&P Global Ratings 18Improving Funding And Liquidity Further Support Credit Profiles
Stable Funding Ratio (%)
– Overall improvements in funding and
2019A 2020A 2021A
liquidity metrics are largely due to public
150 support during the pandemic, leading to
larger deposit portfolios and overall
100
liquidity.
50
– Diverging metrics reflect funding profiles
0
HSBC BNP Credit Banco UBS ING BPCE Standard Credit Barclays Societe Deutsche UniCredit Top 100
inherited from the past or conscious
(a) Paribas
(a)
Agricole Santander
(a) (a)
(a) (a) (a-) Chartered Suisse (a-) (bbb+)
(a-)
Generale
(bbb+)
Bank
(bbb)
(bbb) European
banks*
management choices, but they are not
distinguishing factors for our European G-
Broad Liquid Assets/Short-Term Wholesale Funding (x) SIB ratings.
2019A 2020A 2021A
– The expected normalization of monetary
4.0 policy in Europe will lead to increased price
3.0 discrimination among banks based on their
2.0
credit profiles, and European G-SIBs are
generally well placed in this context.
1.0
0.0
HSBC BNP Credit Banco UBS ING BPCE Standard Credit Barclays Societe Deutsche UniCredit Top 100
(a) Paribas Agricole Santander (a) (a) (a-) Chartered Suisse (a-) (bbb+) Generale Bank (bbb) European
(a) (a) (a) (a-) (bbb+) (bbb) banks*
*Median. Letters in brackets indicate stand-alone credit profiles (SACP). A--Actual. Stable funding ratio is stable funding sources relative to stable funding needs, see
Table 28 of the Financial Institutions Rating Methodology for details. Source: S&P Global Ratings
S&P Global Ratings 19Material ALAC Buffers Provide Uplift To Most G-SIB Issuer Credit Ratings
All European G-SIBs Except UniCredit Benefit From One To Two Notches Of
– All European G-SIBs operate in jurisdictions
Rating Uplift Owing To Sizable Subordinated Buffers That Would Support Senior with an effective resolution framework and
Creditors In A Resolution Scenario therefore are eligible to receive rating uplift
ALAC/S&P RWAs (bps) due to ALAC.
ALAC buffer Threshold up to one notch Threshold up to two notches ALAC uplift (notches)
– For most of them, ALAC buffers exceed our
1,400 threshold for at least one notch of uplift.
1,200 However, for four European G-SIBs, SACPs
+1 +1 +1 +1 +1 +1 +1 +2 +2 +2 +2 +2 +0 of ‘a’ constrain the uplift to only one notch,
1,000 according to our rating methodology.
800
– UniCredit is the only European G-SIB with
600 ALAC buffers below our threshold to
receive one notch of rating uplift. UniCredit
400
relies more on senior preferred debt to
200 meet its regulatory MREL (minimum
requirement for own funds and eligible
0
HSBC BNP Credit Banco UBS Group ING Groep BPCE Standard Credit Barclays Societe Deutsche UniCredit liabilities) than other G-SIBs.
Holdings Paribas Agricole Santander (a) (a) (a-) Chartered Suisse (bbb+) Generale Bank (bbb)
(a) (a) (a) (a) (a-) Group (a-) (bbb+) (bbb)
Note: Data according to our 2022 forecasts. ALAC uplift for HSBC, BNPP, CASA, San, UBS and ING is limited to one notch due to their SACPs of ‘a’ according to §252 of
our rating methodology for financial institutions. Letters in brackets indicate stand-alone credit profiles (SACP). ALAC--Additional loss-absorbing capacity.
RWA--Risk-weighted assets. bps--basis points.
Source: S&P Global Ratings.
S&P Global Ratings 20Primary Authors
Nicolas Charnay Giles Edwards Claudio Hantzsche
Sector Lead Sector Lead Associate
+49 69 33 999 218 +44 20 7176 7014 +49 69 33 999 188
nicolas.charnay giles.edwards claudio.hantzsche
@spglobal.com @spglobal.com @spglobal.com
Analytical Contacts
Regina Argenio Richard Barnes Benjamin Heinrich Anna Lozmann
UniCredit HSBC, Deutsche Bank UBS Credit Suisse
+39 0272 111 208 +44 20 7176 7227 +49 69 33 999 167 +49 69 33 999 166
regina.argenio richard.barnes benjamin.heinrich anna.lozmann
@spglobal.com @spglobal.com @spglobal.com @spglobal.com
Nicolas Malaterre Francois Moneger Luigi Motti Philippe Raposo
BPCE, BNP Paribas Credit Agricole Santander Société Générale
+33 14 420 7324 +33 14 420 6688 +34 91 788 7234 +33 14 420 7377
nicolas.malaterre francois.moneger luigi.motti philippe.raposo
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Anastasia Turdyeva Fern Wang Natalia Yalovskaya
ING Standard Chartered Barclays
+353 1 568 0622 +852 2533 3536 +44 20 7176 3407
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S&P Global Ratings 21Related Research
European banks
– The Russia-Ukraine Conflict: European Banks Can Manage The Economic Spillovers, For Now, Apr. 21, 2022
– When Rates Rise: Eurozone Bank Earnings Will Too--Especially For Retail, Feb. 14, 2022
– The Top Trends Shaping European Bank Ratings In 2022, Jan. 31, 2022
Recent bulletins and rating action news on European G-SIBs Latest full analysis on European G-SIBs
– For HSBC, Breaking Up Is Hard To Do, May 6, 2022 – UBS Group AG (Holding Company); UBS AG (Lead Bank), Mar. 04,
– UniCredit's Improving Revenues Are Helping It Absorb The Impact Of 2022
The Russia–Ukraine Conflict, May 5, 2022 – UniCredit SpA, Feb. 22, 2022
– BNPP's Diversified Business Model Supports First-Quarter Solid – HSBC Holdings PLC, Feb. 07, 2022
Results And Financial Goals For 2025, May 3, 2022 – Credit Suisse Group AG, Dec. 06, 2021
– Société Générale's Russia Exit With Rosbank Sale Will Have – BPCE, Dec. 03, 2021
Manageable Capital Impact, Apr. 11, 2022
– Deutsche Bank AG, Nov. 24, 2021
– Outlook Revised To Stable On Top Spanish Banks And Subsidiaries
– Standard Chartered PLC; (Holding Co.); Standard Chartered Bank
Following Similar Action On Spain; Ratings Affirmed, Mar. 22, 2022
(Lead Bank), Oct. 26, 2021
– Deutsche Bank Targets Revenue Growth And Stronger Returns In
– Société Générale, Oct. 14, 2021
Strategic Update, Mar. 10, 2022
– Crédit Agricole S.A., Jul. 29, 2021
– Rising Rates To Buoy Standard Chartered Profit, Feb. 17, 2022
– Banco Santander S.A., Jul. 26, 2021
– Credit Suisse AG's Sharpened Focus On Sustainable Returns
Supports Credit Metrics, For Now, Nov. 9, 2021 – BNP Paribas, Jul. 16, 2021
– Outlook On Several Dutch Banks Revised To Stable On – Barclays PLC, Jul. 09, 2021
Macroeconomic Recovery Prospects, Jun. 24, 2021
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