Lloyds Share News (LLOY)

(Adds details and analyst comments.) By Shara Tibken Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Shares of European banks trading in the U.S. moved slightly higher Friday afternoon as investors digested results of European stress tests, which, as expected, showed the large majority of banks would be able to withstand a potential economic downturn or government bond crisis. The stress tests, intended to restore trust in the European banking system, showed most of the 91 banks scrutinized by the European Union's Committee of European Banking Supervisors passed with flying colors, and only seven banks--five from Spain, one from Germany and one from Greece--would need to raise new capital to fortify their finances and weather potential tough conditions. Despite the results, some investors worried the tests may not be tough enough to reveal the real health of the European banking system. Bank stocks hovered between positive and negative territory ahead of the results, with investors waiting to see if the stress tests were enough to quell concern about the banks' stability after a spring of fiscal and financial problems. The stocks were little changed immediately following the stress test news, but shares moved higher in afternoon trading, with the Bank of New York index of ADRs recently up 0.70% to 124.67, and the European index up 0.62% to 114.16. Both indexes initially slipped into the red following the stress test results. Art Hogan, Jefferies chief market analyst, said some of the stress test results had been leaked in recent days, and investors had a general assumption about how many banks would fail. "A lot of what's going to happen to the stocks has happened already," Hogan said, adding that the market was anticipating the failure of about five to 10 banks. "Lo and behold, the number was seven. The market has kind of shrugged it off." Industry and government officials in Greece, Spain and Germany had hinted this week that major banks in their countries would come through the tests without trouble. In a Goldman Sachs survey released Thursday, market watchers expected 89% of banks would pass the tests, with banks based in Spain, Germany and Greece expected to raise the most new capital. Survey participants expected 10 of the 91 banks would fail the tests. All but one of the 14 German banks that participated in European Union-wide stress tests passed the exercise, the German Bundesbank said Friday. Government-owned Hypo Real Estate Holding AG (HRE.YY) was the only bank that failed the test, as expected. U.S.-listed German banks included Deutsche Bank AG (DB, DBK.XE) and Commerzbank AG (CRZBY, CBK.XE), which both passed the test. Deutsche Bank shares, which initially traded lower following the results, recently rose 31 cents to $64.58, while Commerzbank was up 6 cents at $8.21 on light volume. All Spanish-listed banks passed, but five of the country's unlisted savings banks, or cajas, failed the test and will have to raise more capital. The E.U. tests covered 27 lenders from Spain, and found the five weakest lenders would see their Tier 1 capital ratios fall below 6% in the event of new sharp deterioration in economic and credit market conditions. U.S.-listed Spanish banks initially traded lower following the news, but recently moved higher, with Banco Bilbao Vizcaya Argentaria SA (BBVA, BBVA.MC) shares up 1% at $12.72 and Banco Santander SA (STD, SAN.MC) up 1.5% at $13.16. Greece's state-owned ATEBank (ABGEF, ATE.AT) said Friday that it failed its stress test and that it would need to raise EUR242.6 million in new capital. But five other Greek banks that were also tested passed, although Piraeus Bank SA (TPEIR.AT) barely squeezed by. Still, Greek banks recently were trading lower, with National Bank of Greece SA (NBG, ETE.AT) stock down 1.1% to $2.80 and Alpha Bank AE (ALBKY, ALPHA.AT) down 1.8% to $1.64. Meanwhile, the U.K.'s four banks that underwent the stress test passed, the country's financial regulator said. Royal Bank of Scotland Group PLC (RBS, RBS.LN), whose shares recently rose 4% to $14.21, was the only U.K. bank immediately trading higher on the news. The rest moved higher in afternoon trading, with Barclays PLC (BCS, BARC.LN) up 1.5% to $18.94, HSBC Holdings PLC (HBC, 0005.HK, HSBA.LN) up 19 cents to $50.07 and Lloyds Banking Group PLC (LYG, LLOY.LN) up 1% to $3.91. The Bank of France said the country's four major banks had successfully passed, likely suffering only a limited hit to a key metric of their capital adequacy under the worst-case scenario of a severe recession and a new sovereign debt crisis in Europe envisaged by E.U. banking supervisors. BNP Paribas SA (BNPQY, BNP.FR) shares rose 2.1% to $32.72 and Societe Generale SA (SCGLY, GLE.FR), which initially declined on the news, increased nearly 1% to $9.80. In Italy, all five of the banks undergoing the stress tests passed the examinations. UniCredit SpA (UNCFF, UCG.MI) stock rose 1 cent to $2.63, but Intesa SanPaolo SpA (ISNPY, ISP.MI) slid 11 cents to $18.60. Ireland's biggest banks, Bank of Ireland PLC (IRE) and Allied Irish Banks PLC (AIB, ALBK.DB), also passed the test, the Irish Central Bank and Financial Regulator said Friday. Both companies added to their earlier-session gains on the news, with Bank of Ireland shares up 3.6% to $4.07 and Allied Irish Banks up 6.2% to $2.59. In the Netherlands, its four biggest banks passed the test, including ING Groep NV (ING, INGA.AE), flat at $8.99 after initially trading lower. The four Swedish banks tested passed by a wide margin, the Swedish Financial Services Authority said Friday. Swedbank AB (SWDBY, SWED-A.SI) shares edged up 5 cents to $10.78 on light volume. Other countries whose banks passed the test included Austria, Belgium and Portugal. Meanwhile, Switzerland's banking regulator Friday endorsed Swiss giants UBS AG (UBS, UBSN.VX) and Credit Suisse Group (CS, CSGN.VX) as strong enough to withstand further shocks such as a global recession coupled with a financial markets and real estate slump. The Swiss National Bank urged the two to keep trimming their leverage ratios and improve their capital. UBS stock recently slid 8 cents to $14.87 while Credit Suisse rose 1.2% to $42.62. -By Shara Tibken, Dow Jones Newswires; 212-416-2189; shara.tibken@dowjones.com (Caitlin Nish contributed to this article.) (END) Dow Jones Newswires July 23, 2010 14:41 ET (18:41 GMT)