3 Battered Stocks That Are Ready To Turn

1. Banks that borrowed from the ECB under the Long Term Repo Operation (LTRO) can begin repaying, if they want. Banks must notify the ECB on a weekly basis about how much they want to repay. The ECB will publish amount to be paid back and the number of banks every Friday for the next few years, starting tomorrow. 2. Banks borrowed roughly 1 trillion euros in the two LTRO 3-year operations (Dec 11 and Feb 12). Italian and Spanish banks are believed to have accounted for around 60% of the use of the LTRO, German banks a little more than 10% and French banks a little less than 10%.

The North American market will put the finishing touches on what has been a generally constructive week for the US dollar. Ironically, the one notable currency that it slipped against is the Japanese yen.  Many had come away from the G20 meeting thinking it gave a green light to sell the yen.

We have commented numerous times on the inexorable rise in Spanish non-performing loans (NPLs). Since the Spanish economy started to weaken at the end of 2006, NPLs have been rising sharply; but the subsequent collapse of the Spanish property market exacerbated the matter further, causing a spike in NPLs in 2007 and 2008. Since then, the Euro area crisis and subsequent sharp rise in unemployment have led NPLs at Spanish banks to make new record highs.

When the ECB first announced the LTRO in late 2011 (and executed in early 2012) we explained how the ECB's encumbrance via this 'aid' is in fact a major negative for the rest of the capital structure. We were proved correct and even as Draghi lied and stated there was no stigma, the market priced the LTRO-encumbered banks notably weaker.

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One of the goals of ECB president Mario Draghi's LTRO plan was to get banks to deleverage. Instead it concentrated the risks.

Last month, European banks tapped the ECB for €489bn in a long-term refinance operation dubbed LTRO. On February 29, another round of LTRO is coming up and expect banks to go for the gusto. Banks like cheap money to speculate and that is exactly what they will do. The Financial Times reports Banks set to double crisis loans from ECB