State sales of banking shares spur Eurozone equities

Sales of crisis-era government stakes in banks are pushing the amount of equity sold in Europe this year to the highest level since the end of its sovereign debt crisis as states take advantage of investor demand for Eurozone shares.

Buoyed by a rally in European stock markets, the amount of equity of European-listed companies placed into the market totals $137.5bn in the year to date, according to data from Dealogic, ahead of the entire amount sold in 2016.

Several European governments have taken advantage of improved investor sentiment towards Europe this year to raise cash by selling down their bank shares. The Netherlands placed shares in ABN Amro, the Belgian government disposed of shares in BNP Paribas, and Ireland sold a stake in Allied Irish Bank. Spain is to pare its stake in Bankia, with the Spanish government indicating earlier this year that such deals may arrive after the summer.

Government-led placements have also been accompanied by Europe’s banks raising billions in new equity over 2017, with Italy’s UniCredit, Spain’s Banco Santander and Germany’s Deutsche Bank completing multibillion-euro rights issues.

Analysts at Olivetree said they expected a sharp increase in share sales for the rest of the year. “With a relatively quiet macro calendar in the next six weeks, there is likely to be a raft of secondary blocks waiting in the sidelines,” they said.

Olivetree said other possible sales could include French privatisations, including the sale of state-owned shares in the telecom company Orange. The French government sold shares in the gas utility Engie this month as part of a €10bn asset sale plan announced in July.

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UK chancellor Philip Hammond has indicated the British state may face a multibillion-pound loss on its 73 per cent stake in Royal Bank of Scotland when it is finally sold, although he said in April the government was not actively marketing its holding.

European stocks have performed strongly this year, with the Euro Stoxx 50 index up 7.6 per cent in the year to date. While that lags behind the US S&P 500’s gain of 11.8 per cent, the Stoxx 50 has appreciated 22.3 per cent in US dollar terms during 2017.