The Paris stock market lost 2.15%, London 1.87%, Frankfurt 2.15%, Milan 2.46% around 10:40 GMT. In Madrid, the Ibex-35 operated with losses of 2.9%.
The banking sector of the expanded indexor Stoxx Europe 600 For its part, it fell by 4.7%, after a sharp increase in the cost of insurance against the risk of default (CDS) of several European banks.
The action of the main German bank Deutsche Bank sank more 12.43% and its rival Commerzbank registered losses of 8.99%. The oscillation of the CDS, a derivative associated with credit risk, is attracting attention.
In the case of Deutsche Bank, the insurance that covers its debt indicates a probability of default of 27.4% in the next five years. For Commerzbank this is 19.3%, according to Bloomberg.
In Paris, shares of the Société Générale bank fell 7.46% and shares of BNP Paribas lost 6.40%. In London, Barclays lost 5.94% and HSBC 4.01%.
The reasons for the fall in stocks in Europe
Bank shares fell sharply in Europe on Friday, especially those of the heavyweights Deutsche Bank and UBS Groupwho were driven by the fear that the worst problems in the sector since the financial crisis of 2008 have not yet been contained.
Indicators of financial market stress also raised alarm bells again more broadly, with the euro falling against the dollar and bond yields plunging.
The actions of Deutsche Bank They fell for the third day in a row, plunging more than 12% after a sharp rise in the cost of insuring their bonds against default risk.
The shares of the largest German bank have lost a fifth of their value so far this month and its “swaps” or credit default swaps (CDS) – a form of insurance for investors in bonds – suffered the biggest rise on Thursday on a day for which records are available, according to Refinitiv data.
“Deutsche Bank has been in the spotlight for a while, much like Credit Suisse has been”said Stuart Cole, chief macroeconomist at Equiti Capital.
“It has gone through several restructurings and leadership changes in an attempt to get back to a strong position, but so far none of these efforts seem to have really worked.” added the analyst.
Deutsche Bank declined to comment.
The punishment extended to the entire sector, with the index of the main European banks falling 5.1% and British banks losing 4%, down for the third session in a row.
“We are still on edge waiting for another domino to fall, and Deutsche is clearly next on everyone’s minds (fairly or unfairly),” he said. Chris BeauchampChief Market Analyst at IG.
The falls in European bank stocks follow Thursday’s losses in the United States, where investors are watching how far authorities will go to prop up the sector, especially fragile regional banks.
For the fourth time in a week, US Treasury Secretary Janet Yellen spoke to reassure Americans about the safety of the US banking system.
The challenges for the UBS
The global banking sector has been rocked since the sudden failure this month of two regional US banks sparked fears of contagion to other banks.
Policy makers have stressed that the turmoil is different from the global financial crisis of 15 years ago, saying that banks are better capitalized and funds are easier to raise.
However, Concerns have spread rapidly and UBS rushed to take over Swiss competitor Credit Suisse AG on Sunday after the troubled bank lost investor confidence.
Swiss authorities and UBS are rushing to close the acquisition within a month, according to two sources familiar with the plans, to try to retain Credit Suisse customers and employees.
Investment bank Jefferies cut its recommendation on UBS shares from “buy” to “hold”, saying the acquisition of its former rival would change UBS’s equity story, which was based on a lower risk profile, an organic growth approach and high returns on capital.
“All of these items, which is what UBS shareholders bought, have been gone, probably for years,” said.
UBS shares fell 7% on Friday and its five-year CDS soared 14 basis points.
The Credit Suisse acquisition has also raised broader concerns about investor exposure to a fragile banking sector. The decision to give shareholders priority over additional tier 1 (AT1) bondholders rocked the AT1 bond market to the value of 275,000 million dollars.
AT1 convertible bonds were designed to be used during bailouts in order to avoid the costs of bailouts being passed on to taxpayers.
As part of the deal, the Swiss regulator determined that Credit Suisse’s AT1 bonds, with a notional value of $17 billion, would be written down to zero, a decision that surprised global credit markets.
Bill Winters, chief executive of Standard Chartered, said on Friday that zeroing these bonds had “profound” implications for global banking regulation. He also told a financial forum in Hong Kong that the US Federal Reserve’s move to guarantee uninsured deposits constituted “moral hazard.”
US authorities had invoked “systemic risk exceptions” following the bankruptcies of SVB and Signature Bank that allowed them to protect unsecured deposits, including those of wealthy tech executives and cryptocurrency investors.
Source: Ambito
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