A disparity in results from Commerzbank and Crédit Agricole

February 11, 2021 15:00

Since the financial crisis of 2008, the financial sector has suffered due to interest rate and fiscal stimulus policies by central banks. "Quantitative easing" was the star issue during the years immediately after the recession, and worsened with the euro and debt crisis. This period was marked by low interest rates which directly affected the profit margins of the banking business.

The coronavirus crisis has only extended this situation, increasing its growth prospects in the future, because for the last few months, states have been facing a crisis not seen for many years. Years where we have been serious problems in GDP growth and unemployment.

During today's trading day, the results of two major European banks were announced, which have been unevenly received by the financial markets despite the fact that they have not been entirely positive.

Commerzbank has, in recent months, has been involved in several problems which encouraged rumours about a possible merger with another German giant, Deutsche Bank. Although, this merger ended up being ruled out for the time being. At the moment, this company is undergoing a deep restructuring, though this may be too lttle, since the announced results today show net losses of $2.7 billion euros, compared to $97 million in losses during the previous year.

Among the restructuring plans, there is the possibility of the closure of hundreds of branches, eliminating up to 10,000 jobs in a clear attempt to reduce costs and return to the path of growth and profitability. These results have been received harshly by the market, while at the same time, Commerzbank announced losses of more than 6%.

Technically speaking, after marking an annual minimum after the sharp falls caused by the pandemic, the price has stabilized in a channel with an upward slope that led it to exceed its 200-session moving average that currently behaves as its first support level. With today's falls, the price is looking for this important level and the breakdown of it could cause an increase in falls to the lower zone of its channel.

If we look at its oscillators, we can see that there is a bearish divergence in both its MACD and stochastic indicators, so this could lead to a bearish breakout of its 200 session average if the declines continue.

Source: Admiral Markets MetaTrader 5. Commerzbank daily chart. Data range: from October 18, 2019 to February 11, 2021. Prepared on February 11, 2021 at 12:30 CET. Keep in mind that past returns do not guarantee future returns.

Price evolution in the last 5 years:

  • 2020: -4.55%
  • 2019: -4.6%
  • 2018: -53.75%
  • 2017: 72.58%
  • 2016: -24.3%

On the other hand, Crédit Agricole is the second largest bank listed in France, and saw extraordinary losses of $851 million after its profit fell by 92.6% in the fourth quarter of 2020. This is mainly due to the deterioration of its assets and provisions, although Crédit Agricole stipulates that if you exclude these circumstances, it earned a net profit of up to 975 million euros.

Despite this, a profit of 4.7 million euros was recorded for the year as a whole, a reduction of 34.9% compared to the previous year. Contrary to Commerzbank, these results have been positively received by the market, since Credit Agricole is currently experiencing a 3.70% rise.

Technically speaking, after bouncing off the coinciding zone of its 200-session moving average and the 38.2% fibonacci level, the price is on a new bullish momentum towards its previous highs that currently act as the main resistance level in the green.

Source: Admiral Markets MetaTrader 5. Credit Agricole daily chart. Data range: from October 30, 2019 to February 11, 2021. Prepared on February 11, 2021 at 12:40 CET. Keep in mind that past returns do not guarantee future returns.

Price evolution in the last 5 years:

  • 2020: -20.15%
  • 2019: 37.06%
  • 2018: -31.67%
  • 2017: 17.15%
  • 2016: 8.27%

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