European investors are anticipating the possibility that the European Central Bank (ECB) will have to provide another infusion of cash to the region’s banks, According to a new survey by Fitch Ratings.
The rating agency says that it believes that another round of cheap three-year financing from the ECB will be necessary for some banks because they will not have been able to deleverage sufficiently by the time the financing provided last year needs to be repaid, and it says that the shot-in-the-arm from last year’s financing “is already fading”.
Almost 40% of respondents to its survey think that another long-term refinancing operation (LTRO) will be necessary, compared with 16% who believe the funding provided so far should buy enough time to address banks’ structural funding imbalances, Fitch says.
Additionally, the survey found that 25% of investors said they would not invest in any European senior unsecured bank debt. Only 12% of survey participants ranked banks as their top investment choice, down from 27% in the prior quarter and behind high yield, investment grade corporates and emerging market sovereigns.
Fitch says it believes the wholesale funding markets will remain volatile for banks this year, and that they will be especially tough for those in peripheral eurozone countries.
The survey was conducted between March 27 and 4 May, and represents the views of managers of an estimated US$5.6 trillion of fixed-income assets.