Feb. 3 (Bloomberg) -- European banks are more likely to reinforce capital by selling stock than by shrinking assets and need about 165 billion euros ($217 billion) in a mild recession scenario, JPMorgan Cazenove analysts wrote in a note to clients.
“Despite denying it today, we believe CEOs will prefer this option of a ‘shotgun’ approach raising equity once markets have stabilized,” analysts led by Kian Abouhossein wrote in the note published today.
Banks will likely pursue rights offers when market prices approach lenders’ tangible book values, the analysts said. More than half of the 43 companies tracked by the Bloomberg Europe Banks and Financial Services Index trade at below 0.8 times tangible book value, data compiled by Bloomberg show.
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