Europe’s banks lurched to an 11 year low on Thursday as a grim outlook from Credit Suisse and worries about Spanish bank exposure to Latin America added to mounting concern about the impact of probable recessions.
By 1030 GMT the DJ Stoxx European banking index was down 4.2% at 196 points, after falling to 194.2, its lowest level since 1997. Spain’s Santander, Europe’s second biggest bank, fell 8% and BBVA lost 6%, extending Wednesday’s falls on heightened concerns about risk across Latin America, where both banks have big operations. It follows Argentina’s decision to nationalize its private pension system.
Banks were also hurt by a fall by their US counterparts on Wednesday, details of a 1.3 billion Swiss franc ($1.1 billion) quarterly loss by Credit Suisse and other factors, analysts and dealers said. “It’s the growing awareness of recession, Credit Suisse taking losses, ING’s CFO quitting. It’s a mix of things,” said Bruno Paulson, banks analyst at Sanford Bernstein in London.
Rescue plans unveiled by several countries in the last two weeks will recapitalize banks and are helping funding liquidity, but cannot prevent the impact of a recession on earnings. “The steps taken (by policymakers) do seem to have stopped the banking system collapsing. Now we’re onto the recessions. Even if the actions are dealing with the core banking crisis, that doesn’t mean we’re not going to get recessions,” Paulson said.
Credit Suisse shares tumbled 8% after it confirmed its loss and big asset writedown and warned the rest of the year would be tough. “More detail on the underlying 1.8 billion Swiss franc investment bank loss does little to reassure on a miserable investment bank result,” Matthew Clark, analyst at Keefe, Bruyette & Woods, said in a note.
Other banks with big investment banks dipped, with UBS down 6.5% and Deutsche Bank, which reports next week, and Barclays both down about 3%. Italy’s UniCredit fell 5.5% as it was also hurt by comments from Libya’s central bank that it does not intend increasing its 4.9% stake, dealers said. (Reuters)