Top Europe banks warn of euro strength, ‘wait-and-see’ market amid U.S. tariffs
Some of Europe’s top banks have sounded alarm bells over the strength of the euro and outlined how U.S. tariffs have reshaped the investment landscape in the second quarter. Germany’s largest lender Deutsche Bank on Thursday reported a second-quarter profit beat but noted, across the board, the effects of the relative strength of the euro against the U.S. dollar. Speaking to CNBC’s Annette Weisbach, the lender’s Chief Financial Officer James von Moltke said the currency appreciation is the “big thing that’s kind of flowing through our numbers,” which showed mixed results in Deutsche Bank’s core investment banking subdivision. At BNP Paribas , continental Europe’s largest bank by assets, the global markets unit saw a 26.8% year-on-year boom in the fixed income, currencies and commodities subdivision, despite a “more challenging environment than last year, impacted by tariff announcements, geopolitical uncertainties, and the dollar’s depreciation vs. the euro.” Zeroing in on foreign exchange rates, CFO Lars Machenil told CNBC’s “Europe Early Edition” that the euro strength meant “all the income generated outside of Europe was a bit impacted by that.” Critically, banks with high U.S. activity can suffer the impact of the greenback’s depreciation when converting dollar earnings into local currencies — particularly in the case of the recently strengthening euro. The European currency has added 13.46% against the greenback in the year to date, according to LSEG data, spurred on by volatility surrounding U.S. President Donald Trump’s tariffs and their impact on the outlook of the world’s largest economy. The latest activity from relevant central banks is supporting both currencies, with the U.S. Federal Reserving holding interest rates in June, while the European Central Bank on Thursday kept monetary policy unchanged . The 27-nation European Union and Washington are still locked in a race to agree a trade deal by Washington’s Aug. 1 deadline, before Trump materializes a threat to impose a 30% levy on the bloc’s exports to the U.S. The ongoing fog over the trade future of the two former transatlantic allies is reshaping the market and investment picture for market and corporate activity. Stateside, top lenders cashed in on their trading dominance and benefitted from Trump policies rattling markets for bonds, currencies, equities and commodities. In Europe, BNP Paribas’ Machenil said the uncertainty led to a “wait-and-see” approach that the bank also cited for the stable quarterly performance of its global banking unit, which houses its operations in mergers & acquisitions and equity and debt capital markets. “It’s not that [clients] are all retracting and saying we’re going to stop financing,” Machenil stressed. “It’s a bit wait and see, waiting to see where the opportunities are. So the discussions and the pipeline are very active.” Italy’s second largest lender UniCredit — which on Wednesday posted a 25% year-on-year hike in second-quarter net profit — pointed to “macro volatility and U.S. tariff concerns, which temporarily shifted activity towards trading in Q2.” Deutsche Bank’s Von Moltke said that U.S. tariffs could translate into a “relatively steep” hike in currency conversions and an ultimate “headwind” for European exporters, while noting that the impact of the levies would be “very varied” for each corporate business. The European second-quarter earnings season has now fully kicked off, with two other major European banks, Britain’s Barclays and Swiss lender UBS , due to report next week.
