HALISTER1: ECB Impact on Bank Lending Overdone; Can go More Negative: JPM

ECB Impact on Bank Lending Overdone; Can go More Negative: JPM

(Bloomberg) -- The main issue to look at when assessing further ECB easing is how it will affect sentiment and risk-taking behavior and not the possible impact on net interest income for banks, JPMorgan economist David Mackie writes in client note.
  • Fears that further cuts could impact bank profitability to such an extent they impair lending and are counterproductive seem overdone, given Europe’s experience over the past 18 months
  • Central banks have shown tiered reserve-charging regimes can greatly reduce the direct effect on bank profitability; in any case banks can increase fees on some products and even eventually make household deposit rates negative
  • NOTE: JPMorgan expects ECB to cut the deposit rate cut by 20bps to -0.5% in March and by another 20bp to -0.7%, possibly in June
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
David Mackie (JPMorgan Chase & Co)

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