1 Oct 2018

Prudential Data Report Q2 2018

This report collates timely information on EU GSIBs’ prudential capital, leverage and liquidity ratios with updated information as at 30 June 2018.

It also illustrates the recent performance of the debt and contingent convertibles (CoCo) markets and the funding structure for banks in Europe.

Among the main findings of this report:

  • The weighted average CET1, liquidity coverage ratio and leverage ratios for EU GSIBs stood broadly unchanged against the ratios reported in 1Q2018
  • EU GSIBs end-point CET1 ratio stood at 13.09% in 2Q 2018, almost unchanged from 13.15% in 1Q18. Earnings retention contributed 25bps to the CET1 ratio variation. This increase was offset by an increase in RWAs (-4 bps). FX variation and other bank-specific factors such as litigation and conduct charges and pension costs by one bank and share buy-backs by another bank also contributed to fully offset the contribution of profit retention (-26bps).
  • End-point Tier 1 ratios slightly decreased to 14.8% in 2Q 2018, from 14.9% in 2Q 2018.
  • End-point Leverage ratios (LR) stood at 4.69% in 2Q 2018, almost unchanged from 4.71% in 1Q 2018.
  • Liquidity Coverage Ratio (LCR) slightly improved at 145.2% on a weighted average basis in 2Q 2018, from 145.1% in 1Q 2018.
  • Box 1 of this report (pages 19-24) summarises a recent AFME report on Capital Markets Union (CMU) Key Performance Indicators: Measuring Progress and Planning for Success. This report is the first publication in annual series which will review developments in the CMU project. The report finds that although some capital markets areas have shown encouraging improvements over the last years, EU corporate issuers continue to be over reliant on bank finance, the flow of capital continues to be fragmented along national lines, and capital markets need further scale and depth to support economic growth and innovation.
  • Capital raising from markets decelerated from a year ago. The amount of new capital raised during the first nine months of the year by EU banks totalled €17.1bn. This compares with €49bn raised during the same period of 2017 and €57.5bn in 2017 full-year (FY). The largest contribution to total capital raising from markets was from CoCos, with a total of €15.3bn, and less significantly from secondary offerings (€1.4 bn).
  • Higher debt servicing costs for new CoCos. Average coupon rates for newly issued CoCos have increased during the year, from record-lows observed in the first quarter of 2018.