Europe's big banks in tentative return to growth mode

Fri Sep 12, 2014 6:00am EDT
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By Laura Noonan

LONDON (Reuters) - Europe's big banks returned to growth mode in the first half of this year, expanding their books by 530 million euros ($685 million), in a sign they are starting to get back on their feet after the financial crisis.

But even though the banks' assets are growing as a result of lending money or doing deals, their profitability remains below target, loan losses are still a burden and many businesses across Europe still find it tough to borrow cash.

Europe's 30 largest listed banks, battered by the crisis and regulatory demands that followed, shrank their balance sheets by 10 percent from 2008 to 2014, shedding about 2 trillion euros of assets by selling businesses or chunks of loans.

This process has contributed to a squeeze on lending which has not helped Europe's weak economies revive growth. The European Central Bank last week stepped in with a new plan to get more money flowing from banks into the flagging euro zone economy.

"We are on an improving and healing trend across Europe, but there are degrees of healing," said Vincent Montemaggiore, Boston-based portfolio manager at Fidelity, one of the world's largest investment houses.

"Generally, in the northern part of Europe you're starting to see some early signs of asset growth and loan growth, and in the southern part you're still seeing declining assets but at a more moderate pace."

Montemaggiore said he was not expecting bank assets to grow very robustly in either the north or south of the region over the next couple of years.

Data compiled by Reuters shows the 30 banks - which include the likes of Deutsche Bank (DBKGn.DE: Quote), Bank of Ireland (BKIR.I: Quote) and Santander (SAN.MC: Quote) - added 530 million euros of assets in the six months to June, taking the total to 23.1 billion euros.   Continued...

The headquarters of Deutsche Bank are pictured in Frankfurt October 29, 2013.    REUTERS/Ralph Orlowski