Betting on basket cases in the European banking sector has worked reasonably well over the past two years. That may explain why a big investor, probably Capital Group, just sold almost 1.8 billion euros of shares in German lenders Deutsche Bank and Commerzbank . France’s Société Générale and Italy’s UniCredit may now offer similar rewards for brave dumpster divers.
The complication is that those two banks are not on the same radical belt-tightening journey that Deutsche and Commerz have been on in recent years. Costs at SocGen, for example, are expected to chew up a whopping 70% of its revenue this year, as per Refinitiv data, and analysts expect CEO Frédéric Oudéa to keep increasing expenses over the next two years. UniCredit’s CEO Andrea Orcel has a respectable 55% cost-income ratio but is planning on reinvesting much of its planned 1.
- The exit by the large shareholder follows a similar move by U.S. private equity firm Cerberus in recent months.- “Our focused business model and risk management capabilities have proven their resilience in challenging times,” Deutsche said. One investor who holds such sizable stakes in both banks is Capital Group of Los Angeles. A spokesperson for the investor declined to comment.- The sale resulted in proceeds of 1.
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