European banks’ bumper quarter raises prospect of windfall taxes

Europe’s largest banks generated large income on the again of rising rates of interest within the third quarter, elevating the prospect of governments concentrating on the lenders with windfall taxes.

Deutsche Financial institution reported considered one of its strongest quarterly performances since earlier than the monetary disaster on Wednesday morning, whereas Barclays, Santander, UniCredit, Commonplace Chartered, HSBC and UBS all beat analysts’ estimates.

Greater rates of interest — which generally increase financial institution earnings — have been the primary purpose, whereas sturdy efficiency in mounted revenue buying and selling additionally helped lenders with massive funding banks, resembling Deutsche Financial institution and Barclays.

The income are a beautiful goal for cash-strapped governments. In July, Spain grew to become the primary western European nation to suggest a windfall tax on financial institution earnings, following within the footsteps of Hungary, which has already launched one. Spain’s plans set it on a possible collision course with the European Central Financial institution.

The UK’s new chancellor, Jeremy Hunt, can be getting ready to take care of a financial institution levy in a set of tax rises designed to undo the disastrous influence of a shortlived tax-cutting Price range unveiled by his predecessor.

Financial institution of England rates of interest have risen to 2.25 per cent from 0.1 per cent final 12 months, whereas financial institution analysts anticipate the European Central Financial institution to boost rates of interest from 0.75 per cent to 2.5 per cent subsequent 12 months.

Barclays reported a pre-tax revenue of £1.97bn for the three months to the tip of September, up 6 per cent from a 12 months in the past and beating analyst expectations of £1.81bn.

Deutsche Financial institution’s pre-tax revenue greater than doubled to €1.6bn within the third quarter, the very best for the interval since 2006 and above the typical analyst expectation of €1.3bn. All 4 divisions of the financial institution posted greater income, with its funding financial institution unit gaining market share in mounted revenue buying and selling.

Santander, the eurozone’s greatest lender, reported an 11 per cent year-on-year enhance in web revenue to €2.42bn within the third quarter, beating expectations however marking a slowdown from development within the earlier three months.

The Spanish financial institution elevated its reserves for potential mortgage losses by 24 per cent to €2.76bn as inflation and better rates of interest put extra companies and customers underneath stress. However whereas default charges elevated within the US and Brazil, they fell within the UK, Spain and Mexico.

Milan-based UniCredit mentioned that web revenue this 12 months would exceed €4.8bn, greater than its earlier steerage, because of rising rates of interest and higher than anticipated third-quarter earnings.

Italy’s second-largest financial institution reported a report €1.71bn revenue within the three months ending in September, greater than the €1bn analysts had forecast because of decrease than anticipated mortgage losses.

Commonplace Chartered’s third-quarter income got here in greater than anticipated because of rising rates of interest, with Singapore’s contribution to the financial institution’s backside line surpassing that of Hong Kong, which has struggled to get better from pandemic restrictions. The financial institution reported pre-tax revenue of $1.4bn within the third quarter, up 40 per cent from a 12 months earlier and beating analyst estimates of $1.1bn.

The outperformance from StanChart follows rival lender HSBC posting bumper third-quarter income on Tuesday and comes regardless of latest tumult in its dwelling market with wild swings in UK authorities bonds.