Goldman Sachs said the European banks sector needs to raise about 60 bln to 90 bln euros, or withhold one year of dividends, to reach an aggregate Tier I ratio of 9% — a level achieved by European banks that have recapitalized recently.
The bearish comment by the Goldman analysts weighed on European stocks, with the benchmark FTSEurofirst 300 index down 0.43% at 1,172.99 points by 5:40 a.m. EDT.
The analysts said they do not expect the mounting writedowns per se to trigger additional capital calls at this point. "Instead, we believe that regulatory pressures and a sharp turn in the European credit cycle are the two main causes for concern for bank investors."
Access to liquidity, capital adequacy and post-crisis profitability are the key areas of near to medium-term uncertainty, the analysts said in a note to clients.
European banks' share prices remain under pressure and the sector is weighed down by the risk for additional capital raisings to cover tighter capital standards, a more severe downturn in the European credit cycle, or a combination of both, the brokerage said.
Goldman Sachs cut its rating on Spain's Santander to "neutral" from "buy" and took down price targets for Deutsche Bank, Commerzbank, Deutsche Postbank and several others.