CaixaBank records biggest improvement in liquidity among European banks in Q2

CaixaBank SA recorded the biggest improvement in liquidity among European banks in the second quarter, according to S&P Global Market Intelligence data.

The Spanish lender recorded a 20-percentage-point increase in its liquidity coverage ratio (LCR) compared to the previous quarter, bringing it to 217.1% as of June 30, the highest among banks in the region.

The LCR measures the highly liquid assets that banks are required to hold under Basel III capital standards. Lenders must maintain a precise mix of assets that can be quickly turned into cash, which can cover their total net cash outflows over a 30-day period in a potential stress event. Large European banks must hold a minimum LCR of 100%.

CaixaBank was able to achieve a record-high LCR and net stable funding ratio for the quarter on the back of a stable deposit base and a strong wave of retail deposits and wholesale operational deposits, CFO Javier Pano said on a second-quarter earnings call.

Svenska Handelsbanken AB (publ) improved its LCR by 3% quarter over quarter to 187%, placing the Swedish bank second among the 30 European banks in the sample. Three other Nordic banks were also in the top 10: Swedbank AB (publ), Nordea Bank Abp and Danske Bank A/S.

Thirteen banks recorded a quarterly decline in their LCRs, led by Danske Bank and Groupe BPCE, both of which reported a drop of 8 percentage points. Their LCRs fell to 160.5% and 143%, respectively.

BNP Paribas SA had the lowest LCR in the sample at 130.4% as of June 30, followed by Skandinaviska Enskilda Banken AB (publ) at 130.5% and Deutsche Bank AG at 132.7%.

European banks exhibited sufficient liquidity, along with strong capitalization and sustained profitability, in the first half despite a slight decline in net interest income and a minor increase in credit costs, S&P Global Ratings said in a midyear outlook report.

– Analyze individual bank liquidity composition using the Bank Regulatory Capital template on S&P Capital IQ Pro.  – Learn how to find LCR metrics on Screener.

Still, European regulators urged lenders to maintain adequate provisions and consistently stress test their liquidity positions amid uncertain trade policies and a volatile geopolitical environment.

Low liquidity levels in foreign currencies could create vulnerabilities during periods of high volatility as banks may struggle to raise funding in other currencies or hedge foreign exchange risk in the market, the European Banking Authority and other supranational regulators said in a fall joint committee report.

EU banks obtain 21% of their total funding in foreign currencies, with the US dollar accounting for 12%, they noted.

CaixaBank also logged the highest net stable funding ratio (NSFR) in the region at 150% in the second quarter, Market Intelligence data shows. NSFRs require banks to maintain a minimum amount of stable funding based on the liquidity characteristics of their assets and the expected cash flows over a one-year period.

Four of the UK's largest banks were among the 10 banks with the highest NSFRs in the quarter, with HSBC Holdings PLC placing second on the list with 145%. Standard Chartered PLC recorded a ratio of 137.4%, followed by NatWest Group PLC at 136% and Barclays PLC at 135.6%.

Swedbank's NSFR improved the most quarter over quarter, rising 3 basis points, and Belgium's KBC Group NV reported the largest NSFR decline of 5 basis points.