Bolstered balance sheets for bigger numbers of European banks but widening gap between good banks and bad. - The balance sheets of increasing numbers of European banks are picking up and adapting to the economic crisis, according to reports in French business newspaper Les Échos. Overall, most of the big European banks made hefty profits in the third quarter of 2009, generated by their financing and investments arms, but the gap between good and bad banks is widening still further. In France, PNB Paribas is doing well (generating €1.3 billion in profit in the third quarter of 2009, up from €900 in Q308), as is Société Générale (profits of €430 million, up from €180 million), Crédit Agricole (generating profits in France of €290 million, slightly down on the same period in 2008 (€370 million). In the United Kingdom, the profitable banks HSBC and Barclays remain at the top of the UK table. HSBC is expected to make new profits of €11.2 billion in 2009, while Barclays generated pre-tax profits of €1.8 billion in the third quarter of 2009. In Italy, Unicredit (€390 million net profit in Q309 compared with €530 million in Q308) and Intesa Sanpaolo (€670 million profits in Q309, unchanged on Q308) reflect the reality of the recovery. In Spain, Banco Santander (net profits of €2.22 billion in Q309, virtually unchanged on Q308 when it made €2.21 billion) and BBVA (net profits in Q309 of €1.38 billion, compared with €1.39 billion in Q308) are still beating expectations, taking advantage of their huge geographical diversity. In Germany, Deutsche Bank tripled its third quarter profits in 2009 to €1.4 billion, while in Switzerland, Crédit Suisse returned to the black, with net profits of €1.6 billion in Q309 compared with a net loss of €800 million in Q308). How is it possible for banks to make such huge profits while the economic recession is biting so hard for companies and households, and credit has dried up? Les Échos says there are three main reasons. Firstly, the resilience of the banks' retail banking, secondly financing and investment flowing full speed ahead with a high demand for bonds, hedging and structured financing, and thirdly because the depreciation of toxic assets has slowed down. Economists remain cautious in their approach, however, because financing and investment may well taper off and toxic assets remain tucked away on balance sheets. In addition, there are still plenty of “bad banks” around, including RBS and Lloyds Banking in the United Kingdom, which received huge public bailouts. In Spain, local savings banks and building societies are suffering from the collapse in the housing market, while the funding of UBS in Switzerland is still problematic. As at 13 November 2009, the league table of European banks (based on value on the stock exchange) was as follows: 1) Santander (€95.2 billion ); 2) BNP Paribas (€67.9 billion); 3) BBVA (€48.2 billion); 4) Crédit Suisse (€44 billion); 5) Unicredit (€41.8 billion); 6) Barclays (€40.9 billion); 7) UBS (€40.1 billion); 8) Intesa Sanpaolo (€38.2 billion); 9) Société Générale (€36.7 billion); and 10) Crédit Agricole (€34.9 billion). (I.L./transl.fl)