Stock Screens: European Banks with Most Downgrades

August 15, 2011 8:30 am

In this edition of stock screens, we take a look at European Banks that are being downgraded by analysts over the past 4 weeks.  European banks use of leverage is rumored to be extremely high at around 30 to 1 or in some cases even 40 to 1.  The major problem with this situation however is the lack of transparency.  Analysts have begun downgrading these banks as concerns develop around the banks’ ability to meet short and long-term obligations.  Let’s take a look at the screening criteria:

  • Equity Universe:  Eastern and Western Europe Stock Exchanges
  • Equity Sector:  Banks
  • Number of Analysts:  Greater than 2
  • Catalyst:  Top 30 Banks with Largest % of Analysts Revising Down Estimates over a 4 Week Period

Recently, portions of Europe have put on short selling bans for some of the stocks in the financial industry.  These countries are shown below with a red circle.

Reuters Explains

European regulators will ban short-selling in four countries’ financial stocks from Friday in a coordinated attempt to restore confidence in a panicky market hit by rumors and higher borrowing costs.

In a statement issued late on Thursday night, the European Securities and Markets Authority (EMSA) said Belgium, France, Italy and Spain were set to bring in the ban, which will vary in detail depending on the country.

But it’s not clear to what extent the ban on short-selling will calm European markets that have repeatedly seized on rumors about the health and funding needs of euro zone governments, and more recently of some of its major banks.

There could also be questions about whether short sellers attention will just switch to other euro zone financial stocks that are not on the banned list.

Despite the fact that these securities may not be shorted on their respective exchanges, it is interesting to note that some of these companies trade on the Pink Sheets market in the U.S.  There may be an opportunity to get around the system if this is the case.

 

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