2008年-ECB欧洲央行_Recent_developments_in_the_earnings_of_euro_area_firms_3页_139kb

RECENT DEVELOPMENTS IN THE EARNINGS OF EURO AREA FIRMS

Core Content

The document analyzes the impact of the financial market turmoil that began in the summer of 2007 on the earnings of euro area firms, focusing on both financial and non-financial corporations. It highlights the changes in actual and expected earnings per share (EPS) growth, as well as the relationship between earnings and corporate bond spreads.

Main Points

• Financial Market Turmoil Impact:
  The financial crisis starting in 2007 significantly affected the balance sheets of euro area firms, particularly financial corporations. This turmoil led to tighter external financing conditions and a slower economic outlook, both of which negatively impacted corporate profitability.

• Earnings Growth Trends:

  • Financial Corporations: Experienced a sharp decline in actual EPS growth from late 2007 to early 2008 due to falling financial asset prices and loan writedowns.
  • Non-Financial Corporations: Showed a more gradual and minor slowdown in EPS growth, indicating greater resilience compared to the financial sector.

• Earnings Expectations:
  Despite the turmoil, professional analysts expect both financial and non-financial corporations to maintain relatively robust EPS growth over the next 12 months. However, the overall sentiment regarding earnings is negative, with downward revisions to expectations.

• Earnings Revision Ratio:
  Chart B illustrates the earnings revision ratio, which measures the balance between upward and downward revisions to EPS expectations.

  • Financial Sector: The ratio deteriorated sharply in the summer of 2007, reversing a previous trend of upward revisions.
  • Non-Financial Sector: Followed a similar trend but with a delay of a few months.

• Corporate Bond Spreads and Earnings:
  The relationship between corporate bond spreads and earnings is explored through Chart C.

  • Credit Risk and Earnings: BBB-rated corporate bond spreads and earnings growth have moved in parallel over the past decade.
  • 2007-2008 Turmoil: BBB spreads nearly tripled from 90 to 250 basis points between June 2007 and May 2008, but earnings growth only slightly moderated, suggesting that the rise in spreads was primarily due to risk repricing rather than economic deterioration.

• Future Outlook:
  The document suggests that while earnings growth expectations are currently robust, the negative revisions to earnings forecasts indicate potential downward risks. The combination of higher financing costs and other factors like rising input and wage costs may further dampen earnings prospects in late 2008 and early 2009.

Key Information

• Chart A: Compares actual and expected EPS growth for financial and non-financial corporations in the euro area, showing a sharp decline in financial sector earnings and a more gradual decline in non-financial sector earnings.
• Chart B: Depicts the earnings revision ratio, highlighting the shift from positive to negative sentiment in both sectors.
• Chart C: Demonstrates the correlation between BBB-rated corporate bond spreads and earnings growth, indicating that the recent rise in spreads was driven by risk repricing rather than economic decline.

Conclusion

The financial turmoil of 2007-2008 had a more pronounced effect on the earnings of financial corporations than on non-financial ones. While analysts expect EPS growth to remain relatively strong in the next year, the current negative revisions to earnings expectations signal potential downward risks. The rise in corporate bond spreads suggests increased perceived credit risk, but the historical relationship between spreads and earnings growth may not be fully restored in the near term.