Europe’s Top Banks Won’t Face Credit Suisse’s Fate, Moody’s Says

Nicholas Comfort, Bloomberg News

Skyscrapers stand on the financial district skyline in Frankfurt, Germany, on Wednesday, Sept. 2, 2020. Partly thanks to the government’s stimulus program, German activity has staged a strong rebound after collapsing in the second quarter, and companies have turned slightly more optimistic that it will continue to accelerate into next year. Photographer: Alex Kraus/Bloomberg , Bloomberg

(Bloomberg) -- Europe’s top banks are unlikely to face the kind of downward spiral that forced Credit Suisse Group AG into the arms of larger Swiss competitor UBS Group AG over the weekend, according to Moody’s Investors Service.

None of the region’s 11 remaining mega-banks, which include Deutsche Bank AG and BNP Paribas SA, show the “credit profile weaknesses that led to investor and depositor loss of confidence” in Credit Suisse which built up over almost two years, Moody’s said in a report on Wednesday.

European banking stocks and bonds have been on a roller-coaster in recent weeks amid Credit Suisse’s troubles and the failure of several medium-sized banks in the US compounded volatility caused by sharply-rising interest rates. Bankers and regulators have sought to convince investors that European banks aren’t comparable to those firms after having overhauled their businesses and improved risk management.

“Those banks that started deep and costly restructuring exercises have largely completed the process,” Moody’s analysts including Michael Rohr in Frankfurt wrote in the report, which focused on 12 banks which are big enough to be considered to be important to the global financial system.

European bank deposits will probably be more stable than in the US, according to Moody’s. The big lenders also tend to benefit from a focus on insured retail deposits and a lower share of “confidence-sensitive” cash from large companies corporates or wealthy individuals, the ratings company said.

“This will help these banks protect their funding bases much better in times of stress and fragile capital markets, thereby supporting the stability of these banks’ liquid balance sheets,” Moody’s said.