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MarketScreener Homepage  >  Equities  >  Euronext Paris  >  BNP Paribas    BNP   FR0000131104

BNP PARIBAS

(BNP)
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Real-time Quote. Real-time Euronext Paris - 01/22 11:38:24 am
43.085 EUR   -2.83%
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EU banking watchdog sounds warning note on leveraged loans

07/30/2020 | 09:09am EST
People walk through the Canary Wharf financial district of London

Some banks in the European Union hold large exposures of increasingly risky leveraged loans that could be hard to offload if investor appetite were to vanish due to the pandemic, the bloc's banking watchdog said on Thursday.

Banks have found the sector offering higher yields at a time of low interest rates, which have been cut further since March as central banks seek to mitigate economic downturns following COVID-19 lockdowns.

The European Banking Authority (EBA) said exposures at a sample of 26 European Union banks to loans made to highly indebted companies that typically don't have an investment grade credit rating, totals 400 billion euros (361.4 billion pounds).

While this is just 2.5% of their total assets, the holdings are concentrated in a few large and highly interconnected lenders, EBA said.

"As the pandemic and the ensuing economic lockdown impair leveraged borrowers' capacities to repay their debts, some banks may suffer losses related to the increase in credit risk and from their mark-to-market positions," EBA said.

"Banks may also face drawdowns on the revolving credit facilities granted to leveraged borrowers and may be left holding leveraged loans that they intended to securitise or sell (hung deals) if investors' appetite vanishes."

So far, default ratios have remained very low due to low maturing volumes, but stresses from COVID could change this, EBA said.

The Bank of England has estimated that the global leverage loan market is worth up to $3.2 trillion (2.46 trillion pounds). The BoE and other central banks around the world including the European Central Bank have already begun asking banks about their exposures to leveraged loans.

"The relaxation of lending standards on leveraged finance has clearly increased the riskiness of these exposures," EBA said, adding it was important that banks' boards have a complete picture of exposures.

By Huw Jones


© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
BNP PARIBAS -2.83% 43.085 Real-time Quote.-0.05%
ING GROEP N.V. -1.48% 7.71 Real-time Quote.0.90%
SOCIÉTÉ GÉNÉRALE -3.30% 16.34 Real-time Quote.-4.01%
UNICREDIT S.P.A. -3.20% 7.749 Delayed Quote.1.32%
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Financials
Sales 2020 44 358 M 53 978 M 53 978 M
Net income 2020 6 556 M 7 977 M 7 977 M
Net Debt 2020 - - -
P/E ratio 2020 8,47x
Yield 2020 4,10%
Capitalization 53 816 M 65 510 M 65 488 M
Capi. / Sales 2020 1,21x
Capi. / Sales 2021 1,21x
Nbr of Employees 198 816
Free-Float 86,6%
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Mean consensus OUTPERFORM
Number of Analysts 23
Average target price 48,96 €
Last Close Price 43,09 €
Spread / Highest target 42,5%
Spread / Average Target 13,6%
Spread / Lowest Target -30,6%
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Managers and Directors
NameTitle
Jean-Laurent Bonnafé Chief Executive Officer & Director
Jean Lemierre Chairman
Philippe Bordenave Chief Operating Officer & Director
Bernard Gavgani Chief Information Officer
Denis Kessler Director
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