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Contrasting fortunes for Europe's banks

Friday, April 24, 2015 - 02:29

A record fine, a share sale and potential relocation - European banks have come back into focus with a bang this week with Lloyds, Deutsche Bank and HSBC all making headlines. Ivor Bennett reports on the contrasting fortunes of a sector still seeking rehabilitation.

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Two banks, two very different stories. On one side - Lloyds, enjoying a rehabilitation of sorts after another government share sale. On the other - Barclays new chairman John McFarlane warning of formidable challenges ahead. The contrast in fortunes reflects a turbulent week for the European banking sector. Deutsche Bank the latest to play 'pariah-in-chief' after a 2.5 billion dollar fine for Libor rate-rigging. The penalty is the largest in a 7-year investigation. But according to JP Morgan's Kerry Craig, the industry may finally have turned a corner. (SOUNDBITE) (ENGLISH) KERRY CRAIG, GLOBAL MARKET STRATEGIST AT JP MORGAN SAYING: "The movement that we saw in the banking union last year really started to add towards some transparency, restore faith in a sector that had really been damaged by the financial crisis." The fine comes as Deutsche Bank reviews a sweeping restructuring plan. Its supervisory board gathering on Friday to discuss ways to restore profitability. Not all the proposals are well liked though in particular the idea to drop the Postbank retail chain. They're also considering cutting back investment banking - despite a discussion on whether Europe needs an investment banking champion. (SOUNDBITE) (ENGLISH) KERRY CRAIG, GLOBAL MARKET STRATEGIST AT JP MORGAN SAYING: "We're seeing a sector that has perhaps become a little bit less competitive compared to the US sector. And the US sector being much larger, has the ability to sway on the European banking. Does that mean we need a champion? I'm not so sold on that." HSBC is another considering its future. Europe's biggest bank launching a review into a possible relocation, citing concerns over recent regulatory and structural reforms. Its current headquarters are in London. Where a big jump in bank levy has put a hefty cost on staying put. For the economy though it would be a painful exit. Prime minister David Cameron attempting the tricky balancing act between tighter regulation and staying competitive. (SOUNDBITE) (English) BRITISH PRIME MINISTER, DAVID CAMERON, SAYING: "It's an important reminder of how vital it is that we keep a pro-enterprise, pro-business, pro-employment policy in our country of keeping taxes low, making us an attractive place to invest." They may have the government's ear, but the banks here still have a long way to go with the public. The bonus backlash very much on show at HSBC's AGM - where nearly a quarter of investors voted against the bank's remuneration report for 2014.

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Contrasting fortunes for Europe's banks

Friday, April 24, 2015 - 02:29