UK and German banks exposed to Greece, but risk is mitigated, says Nomura

As uncertainty over Greek solvency weighs on European banks, Nomura considered exposures and price reactions.

It said that based on last week’s Bank for International Settlements data for the full-year 2014, UK and German banks have the greatest exposures, although the Japanese broker reckons the risk is mitigated partly by collateral.

In terms of wider contagion, in the sovereign shock of the second half of 2011, it was Greek, French and Italian banks that fell the most with Scandinavian, Spanish and Swiss banks proving resilient, the broker noted.

“This time around, the Eurozone is much better equipped to deal with internal shocks, which could limit contagion in the event of any default and generate buying opportunities,” it said, adding that French banks in particular have substantially reduced exposure.

Among its preferred stocks, Nomura highlighted Lloyds Banking Group, Credit Suisse and Societe Generale, where it believes current valuation is particularly attractive and defensive characteristics have improved since the last crisis.