But Santander 27 and BBVA 21 were also seduced

In the banking sector, investors were riveted to the South last year. The best stock market performance of 2006 are to the credit of Italian, Spanish, Portuguese and Greek banks. On average, the sector continued its progress at the same pace in 2005: the DJ Stoxx 600 Bank, which brings together all European institutions rated, it is awarded 18.7 in 2006 after a gain of 21 in 2005. As often, the nationality of the banks was a fairly good discriminator.

The Italy are herself, as in 2005, at the centre of attention. "The Italian banks have been prominent for the simple reason that the consolidation process is accelerated in the peninsula, both by reconciliations between local actors and the arrival of foreign institutions," notes Eric Hazart at Exane BNP Paribas. Intesa-Sanpaolo IMI merger will remain the hallmark of the year. It allows the new set to climb to seventh in the classification of European banks by market capitalisation, behind BNP Paribas but before UniCredit. Suddenly, two Italian institutions are listed in the Top ten European. In their wake, number of Italian banks have been brought by the speculation. Large (Capitalia won 47 on the year) as the small and medium-sized, including most of the "popolare" (BPI, Banca Lombarda, Popolare di Milano have won between 42 and 46).

The "popolare" day

"The movement of concentration had been vetoed by the Governor of the Bank of Italy 2005, said Christophe de Failly in SGAM. It is not surprising that it is finally triggered. But there is a lot of establishments which do not yet have the critical size. And those which have not yet merged are widely encouraged to do so.

Another region in vogue last year: the Iberian Peninsula. The small Spanish banks have "beat", like Sabadell, Banco Valencia, Banco Pastor Banco Popular and Bankinter, which display annual progressions from 53 to 27. But Santander ( 27) and BBVA ( 21) were also seduced. "Dynamism of volumes and recovery of margins in the"retail"domestic, continued growth in Latin America and lack of capital markets activities are arguments which justify the good conduct of the Spanish banks", summarizes Jean Sassus in Raymond James.

Portuguese banks also fired their PIN of the game with 53 for BPI bonds (which was the object of a hostile bid of countryman Banco Comercial Portugues) or 28 of Banco Espirito Santo. Yet once, Greek institutions have lived a good year with increases of 30 for Alpha Bank, 69 for Bank of Piraeus and Marfin 101. Only National Bank of Greece (BNG), the oldest institution in the country, marked the step ( 4 only) after the launch of a large operation in Turkey.

One HSBC down

To the chapter of the disappointments, the banks of the Benelux (ING, ABN AMRO and Dexia) have under-performed. The Swiss and German have evolved in line with the sector. As British banks, they have still marked the step. "The configuration of the cycle is very different between the United Kingdom and continental Europe, stressed Eric Hazart.". Upwelling rates resulted in election by a deterioration in the quality of assets and, therefore, by a rebound in the burden of risk. "Lloyds TSB, Alliance & Leicester HBOS, Royal Bank of Scotland made modest progress. Only Barclays manages to do a little better ( 19) thanks to rumours of redemption by an American actor.

The poor performance is HSBC ( 0.2). Paradoxically, the Sino Group is by far the largest European Bank capitalization but it is the only one to have seen its fall in 2006. "HSBC is a disaster investment: over the past five years, it is the second British Bank the worst performance in stock, only Lloyds TSB have managed to do worse, sighs Ian Gordon in Dresdner Kleinwort.". This sanction is amply merited because HSBC is much more cyclical since Household. But it seems that the market today conceals the incredible growth of Chinese investments tank.