In December 2010, Allied Irish Bank had a Tier 1 Capital ratio of only 4.3% with €4bn of equity backing €145bn of assets


The other problem was they only held €4bn in cash against their €52bn of deposits

Meaning if only 8% of depositors were worried about their weak capital position and wanted their money back, it was game over

Which it was

Allied Irish Bank was nationalised and shareholders were diluted to infinity and back

Roll forward 12 years and in December 2022, AIB held Cash of €38bn against a deposit base of €102bn

Meaning it’s only a problem now, if more than 38% of depositors want their money back

And why would they?

AIB now has a Tier 1 Capital ratio of nearly 20%

It’s the same story across the European banks that we analyse

In 2010, Societe Generale held cash equal to only 5% of deposit liabilities – no wiggle room there!

But in December 2022 it was 40%

BNP Paribas has gone from 6% to 32%

Deutsche Bank has from 3% to 29%

No wonder European Bank CEOs are fairly relaxed

At the Morgan Stanley Financial’s conference a few days ago, CEOs were questioned about the “crisis”

“But I think we should also be very clear that there is, in my view, no similarity of that, in particular, to what we have seen on the West Coast with that, what you see with European banks.” Said Deutsche Bank CEO, Christian Sewing

“Yes. I think it’s a totally different story here in Europe, And so therefore, the situation is not comparable. And I can tell you the regulator is tough on us, watching closely, how liquidity is going. So they’re doing a great job. liquidity is not an issue.” said Commerzbank AG Chairman Manfred Knof

Are they lying, or is it really “totally different”?

Time for #numbersnotnarrative

At 31 December 2022, Silicon Valley Bank held cash = only 8% of deposit liabilities

Signature had 7%

First Republic had 2%

Not much wiggle room, do you agree?

So when people figured out their capital positions were weak because of all the unrealised losses on bonds and wanted their money back,

It was game over

And that is why our Ranmore Global Equity Fund doesn’t hold any US banks but does own European banks

It IS “totally different”

So be careful not to fall victim to Level 1 thinking that this is, “another European Financial Crisis”

The numbers suggest otherwise