Deutsche Bank CEO Josef Ackermann gave an ominous speech in Frankfurt on Monday on the future, or lack thereof, of the eurozone.
Essentially, there is a formidable Euro-banking crisis upon us. Numerous European banks, according to Ackerman, "would not survive having to revalue sovereign debt held on the banking book at market levels."
Several European Banks' market caps have been cut by a third because of the financial crisis -- no small number, and institutional ratings have dropped "below the book value or at best."
Ackerman's outlook for the financial industry is dismal, characterized by volatility and uncertainty.
"We have a financial industry that is still not really providing convincing answers to the questions about the meaningfulness of many modern financial products and trading in securities. The questions are getting louder and require new responses."
His solutions heavily relying on individual action and strong government regulation:
"Many countries and households would have to reduce their debt. The mortgage business and consumer loans were [the few things] driving growth. In addition, there's the problem of shrinking populations in several European countries, which negatively affects the growth of credit markets."
Furthermore, exchange-traded funds (ETFs) must be examined for their market effects, and a dialogue created between banks and regulators to control those effects.
However, he is quick to point out that some suggested solutions, such as the forced recapitalization of European banks, would be counterproductive. "A forced recapitalization would give the signal that politicians do not themselves believe in the measures." Nor, he argues, would the disestablishment of the eurozone be an ideal solution:
"The costs of supporting weak member states, particularly from the German perspective, are less than the costs of disintegration ... It is a dangerous illusion to believe that a country could do better should it reclaim the sovereignty it has delegated to the EU."
Do you think Ackermann's concerns and predictions are accurate? Will the European Union recover of collapse?
To help you monitor the situation in Europe, we list below the most technically oversold European bank stocks based on the RSI(14) indicator.
Do you feel this extreme pessimism is justified? (Click here to access free, interactive tools to analyze these ideas.)
1. Deutsche Bank (NYS: DB) : Deutsche Bank Aktiengesellschaft was founded in 1870. The company provides investment, financial, and related products and services. RSI(14) at 27.87.
2. Credit Suisse Group (NYS: CS) : Operates as a financial services company. The company operates in three segments: Private Banking, Investment Banking, and Asset Management. RSI(14) at 28.46.
3. Aviva (NYS: AV) : Aviva plc, an insurance company, provides products and services in relation to long-term insurance and savings, general insurance, and fund management primarily in the United Kingdom, Europe, North America, and the Asia Pacific. RSI(14) at 31.76.
4. AEGON (NYS: AEG) : Provides life insurance, pensions, and asset management products and services worldwide. During a recent earnings announcement, the company missed second quarter core profit forecasts, hit by dwindling sales and currency fluctuations. RSI(14) at 31.88.
5. ING Groep (NYS: ING) : Provides banking, investment, life insurance, and retirement services worldwide. RSI(14) at 32.18.
6. UBS (NYS: UBS) : Provides wealth management, asset management, and investment banking products and services to private, corporate, and institutional clients worldwide. RSI(14) at 32.71.
7. Flagstone Reinsurance Holdings (NYS: FSR) : Operates as a reinsurance and insurance company worldwide. The company writes primarily property, property catastrophe, and short-tail specialty and casualty reinsurance from its offices in Switzerland, Bermuda, Africa, Cyprus, Puerto Rico, and Dubai. RSI(14) at 33.99.
8. Banco Bilbao Vizcaya Argentaria (NAS: BBVA) : Engages in the retail banking, asset management, private banking, and wholesale banking businesses in Spain and internationally. The bank has a major exposure to both Spain and Portugal. RSI(14) at 35.16.
9. HSBC Holdings (NYS: HBC) : Provides various banking and financial products and services. The Group is headquartered in London and operates worldwide. HSBC is the largest lender in Europe and one of the largest banking institutions worldwide, with the most emerging markets exposure. RSI(14) at 35.23.
10. Banco Santander (NYS: STD) : Provides a range of banking and financial products. The stock has lost almost 30% over the last year. RSI(14) at 35.47.
List compiled by Eben Esterhuizen, CFA.
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Becca Lipman and Eben Esterhuizen do not own any of the shares mentioned above. Data sourced from Finviz.
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