European banks are also under scrutiny from investors amid the turmoil caused in the US financial system by the collapse of Silicon Valley Bank, with Morgan Stanley indicating that attention is mainly focused on the impact of competitive pressure on deposits.

Analysts believe that a strong liquidity and balance sheet structure in Europe will allow European banks to avoid forced liquidation of their bond and swap portfolios. In terms of deposits, Morgan Stanley forecasts a 30% increase in deposit betas by the end of the year, with margins peaking in the second half of 2023, but still allowing the sector to post healthy profitability in 2024.

The key difference from US banks is, according to Morgan Stanley, that the European sector starts from a higher liquidity point (average liquidity ratio is 149% with a minimum requirement of 100%) and lower credit growth (around 2%). compared to 11% per annum in the US), which explains why competition for deposits in Europe is less intense.

Morgan Stanley sees no risk of forced liquidation of bond portfolios in Europe, as it explains that hedging/bond portfolios in the sector represent 30% of the deposit base, while even taking into account non-swap mortgages, this percentage is less than 50%. . Compared to the fact that term deposits in Europe account for 15% of all deposits, the Chamber considers it unlikely that a change in this combination would cause a negative carryover and force the bank to close the hedge.

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