Barclays (BCS), German bank (DB) and Santander Bank (SAINT) According to earnings reports released Wednesday, nearly $ 6.6 billion was collectively set aside in the second quarter for expected credit losses from the coronavirus pandemic.
That adds to the large sums they set aside in the spring, bringing the total amount the three lenders have set aside this year to $ 14.5 billion, reflecting the difficult outlook for Europe’s borrowers like the tank economy.
“The past six months have been among the most challenging in our history,” Santander CEO Ana Botín said in a statement.
The Spanish lender also recorded the value of its assets at € 12.6 billion ($ 14.8 billion) due to deteriorating prospects. Almost half of that amount is associated with his UK business, where he no longer expects to get the same value from acquisitions of smaller lenders in the early 2000s.
Santander’s pre-tax profit fell 49% in the first half compared to the same period last year, caused by a massive increase in bad debt provisions to more than € 7 billion ($ 8.2 billion).
Last week, European leaders agreed on a $ 2 trillion budget and an economic recovery package. Some € 750 billion ($ 880 billion) will go towards rebuilding the EU economies that have suffered most from the coronavirus crisis. The European Commission said earlier this month that it expects the EU’s GDP to decrease 8.3% in 2020, with growth forecast for next year at 5.8%.
Meanwhile, Britain is facing its worst recession in 300 years, with the economy on track to contract 14% this year, according to the Bank of England.
London-based Barclays is preparing for the worst, achieving a four-fold increase in its bad debt coverage in the first half to £ 3.7 billion ($ 4.8 billion), compared to the previous year, due to the anticipated impact of Covid-19. His profit before taxes fell 58% in the period.
The losses were offset by a 31% increase in earnings at Barclays investment bank, which enjoyed a boost to trading revenue from extremely volatile markets.
CEO Jes Staley has long defended the investment bank despite struggling to compete with Wall Street rivals and criticism from activist investor Edward Bramson. “The reason we have been able to support the economy as widely as we have and remain financially resilient is because of our diversified model of universal banking,” Staley said in a statement.
Barclays said it has delivered around £ 22 billion ($ 28.5 billion) of government-backed loans to UK companies and extended the payday break to 600,000 retail customers.
Deutsche Bank, meanwhile, is seeing the payoff for a radical restructuring plan launched last year. The troubled German lender posted first-quarter profit before tax of € 364 million ($ 427 million) versus a loss of € 654 million ($ 767 million) for the same period last year.
“In a challenging environment, we are increasing revenue and continuing to cut costs, and we are on track to meet all of our goals,” CEO Christian Sewing said in a statement.
Like Barclays, Deutsche received a boost from market turmoil. Investment banking revenues increased 31% to nearly € 5 billion ($ 5.9 billion) in the period, driven by fixed income trading.
Deutsche Bank increased bad debt provisions by € 761 million ($ 894 million) in the second quarter, adding to the € 506 million ($ 594 million) it reserved three months ago.
– Julia Horowitz contributed reporting.
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