Italy’s Banca Monte dei Paschi di Siena (BMPS.MI) was the worst performer in the EU-wide stress test conducted by the European Banking Authority and the European Central Bank, according to results published on July 30.
Under the latest test, European banks had to estimate the state of their capital within the next three-year period assuming that the economic crisis resulting from the COVID-19 pandemic continues.
The troubled Italian lender’s common equity tier 1 ratio, a key measure of a bank’s financial strength, dropped to -0.1% in the adverse scenario at the end of 2023. Meanwhile, Germany’s Deutsche Bank and Societe Generale turned out to be one of the underperformers, with CET1 ratios of 7.4% and 7.5%, respectively.
Spain’s Banco Santander and BBVA, though with ratios still below the 10.2% capitalization mark, showed slightly better results at 9.3% and 8.7%, respectively.
Overall, Swedish banks were the top performers in the test, with all of their capital ratios exceeding 10%.
Following the test, European Central Bank Vice President Luis de Guindos called European banks “robust and resilient.” The test could become one of the factors to be considered by the central bank in allowing the resumption of dividend payouts, with the dividend restrictions set to expire in September.
Monte dei Paschi rose over 3% on July 30, while Deutsche Bank and SocGen each lost about 1%. Meanwhile, Santander dropped nearly 2%, while BBVA marginally declined