(Adds details on survey findings, background on financial
health of euro-zone banks)
Sept 2 The European Central Bank's landmark
review of euro-zone banks will have to ask lenders to raise an
additional 51 billion euros to be credible with markets, a
Goldman Sachs survey of large institutional investors has found.
The survey of 125 institutional investors from across the
globe also found that nine of the 130 banks being tested were
expected to fail, with capital shortfalls most likely at
Italian, German and Austrian banks, according to a document
circulated by Goldman Sachs on Tuesday night.
The ECB is examining whether banks have properly recognised
losses in a bid to finally draw a line under doubts about euro
zone banks' balance sheets before it becomes their supervisor on
Nov. 4. Results are expected around Oct. 17.
Producing a result that is in line with market expectations
is key for the ECB, since previous rounds of EU bank tests in
2010 and 2011 were roundly discredited for capital demands and
failure rates that were far less than what investors deemed
Investors' average expected capital demand is 23 billion
euros higher than a previous Goldman survey in October 2013. The
51 billion euros is for capital needs that are outstanding after
capital that banks have already raised, including 47 billion
euros they have raised since October.
Expectations of an "extreme" outcome that would require
banks to raise over 100 million euros fell sharply from 18
percent in October to 8 percent now. The exercise's credibility
amongst investors has improved since then, the survey found,
with 89 percent of investors now expecting the tests to be
credible, up from 70 percent in October.
Three quarters of investors surveyed said they expected the
exercise to be positive for bank valuations, with banks set to
"outperform" the broader equities market once the results are
announced. Euro-zone banks have traded at lower valuations than
their U.S. peers in recent years.
The large listed banks seen by investors as most likely to
have capital shortfalls include Italy's Monte dei Paschi
, Germany's Commerzbank and Portugal's BCP
. Three Greek banks - Piraeus, Eurobank
and Alpha Bank - are also among identified
by investors as most likely to need capital.
(Reporting by Laura Noonan in London; Editing by Leslie Adler)