THE EVENT: The European Central Bank released the results
Wednesday of the second round of its long-term refinancing
operation. A total of 800 banks participated, and the ECB allotted
EUR529.53 billion in the three-year refinancing operation.
The ECB loaned EUR489 billion in December in the first
three-year LTRO at an interest rate of 1% to 523 banks.
The aim is to avert problems at banks that face maturing debt
but don't have access to funding through traditional funding
markets. It also was hoped that healthier banks would increase
lending to the real economy with the additional funds.
Several banks acknowledged their participation in the second
round, as the "stigma" from borrowing the cheap funds continues to
fade, but most declined to disclose the amount.
INVESTOR REACTION: Bank shares throughout Europe initially rose
on the announcement. The STOXX 600 banking index, which had been up
about 1.2%, quickly rose to a 2% gain. However, it fell back to a
1% gain at 1200 GMT, as investors struggled to interpret the
meaning of the total borrowing.
Here are some highlights of bank comments following Wednesday's
announcement of the ECB's second LTRO.
AUSTRIA:
*Erste Group Bank AG (EBS.VI) said it would take EUR1.1 billion
to ensure financing flexibility.
BELGIUM:
*Dexia SA (DEXB.BT) said it took part, but didn't disclose
amount.
IRELAND:
*Bank Of Ireland PLC (BIR.DB) likely participated, according to
a person familiar with its operations. Bank of Ireland, which was
the only Irish lender to remain out of government control during
the country's banking crisis, participated in the previous LTRO
program in December.
*Allied Irish Banks PLC (ALBK.DB)--now effectively
nationalized--also planned to participate in the LTRO program, a
person familiar with the matter said.
NETHERLANDS:
*ING Bank NV said it didn't participate.
*SNS Reaal NV (SR.AE) says it did participate but didn't reveal
the amount. It borrowed EUR1.5 billion in the December LTRO.
NORDIC:
*DNB ASA (DNB.OS) said it borrowed EUR1 billion. DNB doesn't
have any need to fund itself through the ECB, but it made use of
the loan because it was given at favorable terms against securities
that DNB wouldn't otherwise be able to use, a spokesman said. It
took EUR2 billion in the December round, and said it was unlikely
to participate in any future rounds.
Danish bank Danske Bank A/S (DANSKE.KO), which also participated
in December's LTRO loans, wouldn't comment on whether it made use
of the latest loan round, spokesman Kenni Leth said, adding that it
will announce any participation in connection with its
first-quarter report later this spring.
*Nordea Bank AB (NDA.SK), Svenska Handelsbanken AB (SHB-B.SK),
Swedbank AB (SWED-A.SK) and SEB AB (SEB-A.SK) previously stated
that they wouldn't participate.
SPAIN:
*CaixaBank SA (CABK.MC) said it participated, but said it didn't
plan to comment on the amount.
*Banco Bilbao Vizcaya Argentaria SA (BBVA) said it took a
"similar" amount as in the first LTRO, when it took about EUR11
billion.
*Banco Santander SA (STD) declined to comment.
*Bankia SA (BKIA.MC) declined to comment.
UK:
*HSBC Holdings PLC (HBC) confirmed it borrowed about EUR350
million from the second LTRO. It also took part in the first LTRO,
borrowing $5.2 billion.
BANKER COMMENT: The LTRO supports the banking sector and helps
stem the crisis, two large German bank lobby groups said. However,
the measures can't be seen as a substitute for a fully functioning
interbank market, nor can it solve the euro area's sovereign debt
crisis, said the BdB, which represents commercial banks such as
Deutsche Bank AG (DB) and Commerzbank AG (CBK.XE). The BVR, which
represents German cooperative banks, said progress on reforming the
euro area's governing rules and fiscal policies will be crucial for
a sustained strengthening of trust in the region.
ANALYST COMMENT:
*A trader said it was unlikely that LTRO liquidity will be
converted into customer lending, with banks more likely using the
funds to cover maturing debt or inflate capital ratios.
*Economist Martin van Vliet at ING Bank interpreted the data as
a "Goldilocks" outcome -- not overly large as to generate concern
about the fragility of the European banking system, but high
nevertheless.
*Caxton FX said in a note that "on the one hand, the large
take-up suggests that liquidity will continue to improve and that
euro-zone institutions will be more robust moving forward. However,
some might take it as a clear indication of ongoing
instability...What is important now is that European banks use
these funds to lend to individuals and businesses to stimulate
economic growth, rather than just buying up government bonds."
*A Milan-based asset manager said: "The result was better than
expected and the positive news is that a higher number of banks
participated, compared to the first round." The asset manager added
that some Italian banks may have not been ready for the first LTRO
and joined the second.
*"The ECB's two long-term liquidity injections do not solve the
underlying solvency problems in the euro area but they could push
the crisis back into remission for a while if they give economic
growth a boost," said Trevor Greetham, director of asset allocation
at Fidelity Worldwide Investment.
-By Dow Jones Newswires