* Assets fall 2 trln euros at Europe's top 30 listed banks
* Fall amounts to 8 percent of the group's total assets
* Biggest falls at UBS, Deutsche Bank, Barclays and Lloyds
* Increases only at Standard Chartered, SEB and
By Laura Noonan
LONDON, April 16 Europe's top 30 banks cut
assets by 2 trillion euros ($2.76 trillion) last year and are
set to cut them again in 2014 as regulatory pressure prompts
investment banks to shrink and retail banks sell some of their
loans into a rising market.
Measures by regulators to end the systemic threat of banks
being "too big to fail" has encouraged banks to sell off
portfolios of loans and entire subsidiaries and pull back from
business areas such as bond trading, reducing both the size and
riskiness of their business.
Large banks are expensive to bail out, but letting them fail
can be even more costly, since economies and other banks are
dependent on the credit they provide and deposits they hold.
Those with a low level of equity are particularly dangerous,
since even a small percentage change in the value of their
assets can wipe out their capital.
Reuters analysis of year-end statements from Europe's most
valuable 30 listed banks shows total assets across the group
fell 8.3 percent to 22.2 trillion euros, though the figure is
still about 1.7 times the European Union's GDP in 2013.
Just three of the banks boosted total assets last year, and
the biggest falls were at investment banks, led by a 21.5
percent drop at Switzerland's biggest bank UBS, and
double-digit falls at Deutsche Bank and Britain's
"If you look at the leverage constraints in Europe, they're
bigger for investment banks," said Ronny Rehn, co-head of EMEA
banks research at KBW, pointing to regulatory targets on the
ratio of total assets to equity.
"On balance, the wholesale banking space will continue to
have bigger falls (in assets) than retail banks," he added.
INVESTMENT BANKS SET THE PACE
James Longsdon, co-head of EMEA financial institutions at
ratings agency Fitch, cautioned that figures for investment
banks were distorted by the accounting for derivatives, for
example - with no netting allowed of assets and liabilities for
the same counterparty - but said on an underlying basis assets
were likely to continue to reduce.
"We are likely to see a further reduction in leverage in
2014," he said.
UBS, one of the banks left with the heaviest losses after
the market for U.S. subprime mortgages collapsed, is radically
transforming its business by hiving off loans, abandoning risky
bond-trading activities and refocusing the group around its
traditional private banking roots.
Deutsche Bank, which saw total assets fall 18.5 percent last
year, said in February it might have to shrink by more than its
initial plans to meet regulatory targets that are likely to cap
a bank's total assets at no more than 33 times equity.
Barclays' assets fell last year by 176 billion pounds ($295
billion), or 12 percent, reflecting decreases in derivatives and
instructions from the UK regulator to cut its leverage.
Much of the cuts are being made from its investment bank,
which is being slimmed down but still had 864 billion pounds of
assets at the end of December, or 66 percent of the bank's
total. Barclays had 1.312 trillion pounds of assets at the end
of 2013, down from 2.053 trillion pounds at the end of 2008.
SOUTHERN EUROPE HOTS UP
Banks from economically troubled southern Europe trimmed
assets at a slower pace, with an average 5 percent fall across
the five Spanish lenders in the group, 9.5 percent for the two
Italian banks covered, UniCredit and Intesa Sanpaolo
, and 10.7 percent for the lone Irish bank, Bank of
The group does not include any banks from Greece or Cyprus,
where asset disposals are even more dramatic, or regional banks
in Italy and Spain, because those banks are not big enough to
make the top 30 list.
Richard Thompson, chairman of PwC's European Portfolio
Advisory Group, said he expected loan portfolios with an
original value of 80 billion euros to change hands this year, up
from last year's 64 billion euros. The sales prices of the
portfolios will be less than this because some loans are sold at
a discount, though that discount has fallen recently.
"I expect pricing to continue to improve, and I expect more
banks to take advantage of that," Thompson said, adding that the
European Central Bank's review of the euro zone's most important
128 banks could also trigger extra activity.
The ECB is examining whether the banks have properly valued
their assets, including loans to customers, and will encourage
them to take extra losses if it finds them overvalued. Its
findings will be made public in October, along with EU-wide
stress tests on whether banks have enough capital to withstand
KBW's Rehn said the ECB exercise could prompt more banks to
sell assets if it leads to higher provisions for loan losses.
The net impact on capital is the same whether loans are
written down to market price or sold at a loss, but if banks are
forced to make writedowns, there is no incentive to hang on to
assets just to avoid a loss on sale.
($1 = 0.7238 euros)
($1 = 0.5976 British pounds)
(Reporting By Laura Noonan; Additional reporting by Steve
Slater in London and Albert Schmieder in Zurich; Editing by Will