In case you are still wondering how things work in terms of ECB liquidity, read today’s article on Bloomberg: Draghi $158B Free Lunch Boosts Bank Profits.
Banks are benefiting from a European Central Bank subsidy that could reach 120 billion euros ($158 billion), enough to pay every bonus at financial firms in London for the next 24 years at today’s levels.
Royal Bank of Scotland Group Plc, and SA are among more than 500 banks that took 489 billion euros of three-year loans from the Frankfurt-based ECB at a December auction. The loans carry a 1 percent annual interest rate, less than a quarter of the 4.3 percent average yield on euro-denominated senior unsecured bank debt of all maturities in the past year, according to Commerzbank AG.
With borrowing estimated to hit a record 1.2 trillion euros after a second auction later this month, banks may save 120 billion euros over three years. That could boost 2012 profit by about 10 percent for lenders in Italy and Spain, according to estimates by Morgan Stanley.
Don’t you love ECB’s version of quantitative easing? And this was only the first round - there's a second round planned for the end of February.
January 14, 2012
January 15, 2012
© Philip Ammerman, 2012