Three of the largest banks in Europe are now setting aside billions more to prepare for a global recession that is hurting economies from different parts of the world.
Readying for a storm
On an earnings call posted Wednesday, it was reported that the firms namely Banco Santander, Barclays, and Deutsche Bank are adding a total amount of almost $6.6 billion as reserve funds last quarter anticipating loss from loans brought about by the health crisis.
Considering the loan-loss charges in the spring, the reserves bring the total amount for this year to $14.5 billion so far for the three European banks. CNN Business noted that this is an indication of a tough outlook for borrowers from Europe as the economy deals with one of the worst recessions recorded.
Barclays, Deutsche Bank and Banco Santander collectively set aside nearly $6.6 billion in the second quarter for expected loan losses arising from the coronavirus pandemic, according to earnings reports https://t.co/NVQ4a40dO5
— CNN (@CNN) July 29, 2020
Profit for Barclays was down by 58 percent before tax against last year’s same timeframe. The London-based bank raised their debt cover to 3.7 billion pounds (or 4.8 billion) as they brace for the worst that the pandemic is causing.
According to executive chairman of Banco Santander, Ana Botín, the first half of the year has been the “most challenging.” The Santander-based banks valued their assets by 12.6 billion euros, or about $14.8 billion, for reasons of worsening viewpoint.
The Spanish firm has also given up on expecting to derive the same amount from acquisitions of smaller lenders in 2000s, as reported by CNN. Profits for the Banco Santanders dipped by 49 percent against last year of the same timeframe. This blow is caused by mostly bad debt provisions amounting to more than seven billion euros.
German firm Deutsche Bank meanwhile has managed to lower their loss with their efforts of restricting the company, including reducing workforce size. 2020 for the Frankfurt-based company saw profit before tax of 364 euros ($427 million) against a 2019 loss of 654 euros ($767 million). Christian Sewing, CEO for Deutsche bank, stated, “In a challenging environment we grew revenues and continued to reduce costs, and we’re fully on track to meet all our targets.”
Economic recovery package
Just last week, leaders from European nations have gathered to discuss and sign on a recovery package for their economies. After several days of rigorous meetings, the EU heads of 27 countries okayed a fund of 750 billion euros, or around $860 billion. The fund, under a $2 trillion budget, will be dedicated in aiding the economy recover from the blow caused by the coronavirus outbreak, including efforts of helping business extremely hit by the pandemic.
Much earlier, the European Commission had also forecasted an 8.3 percent drop in GDP of the European countries for this year, while also predicting a 5.8 percent increase for 2021.