Bank stocks fall on both sides of the Atlantic as efforts to shore up the financial system fail to calm investor jitters
- Struggling lenders in the US and Europe fell again
- The latest sale came just a day after the First Republic received a £25billion lifeline
- That bailout itself came just hours after Credit Suisse’s £45bn bailout
Bank stocks fell on both sides of the Atlantic as efforts to shore up the financial system failed to calm investors’ nerves.
After a brutal week in markets around the world, struggling lenders in the United States and Europe fell again – despite bailouts from Zurich-based Credit Suisse and San Francisco-based First Republic.
The latest sale came just a day after the First Republic was handed a £25billion lifeline in a desperate bid to boost confidence.
That bailout itself came just hours after Credit Suisse’s £45bn bailout.
But that did little to calm markets left reeling from the collapse of three US regional banks in quick succession – Silvergate on March 8, Silicon Valley Bank (SVB) on March 10 and Signature Bank two days later. later.
In the red: Struggling lenders in the US and Europe fell again
As investors fear the worst is yet to come, the First Republic slumped another 32.8% in early trading. Other regional lenders to feel the heat include Pacific West which fell 7.2%, Western Alliance which lost 15.1%, Zions Bancorporation which fell 3.9% and Comerica which fell 5. 2%. In Europe, Credit Suisse plunged 10.9 percent.
The fallout was felt in stock markets around the world, with the FTSE 100 giving up early gains to close down 1%, or 74.63 points, at 7335.4.
Neil Wilson, strategist at Markets.com, warned of “fear and hatred of banks and markets”, adding: “We are not off the hook.”
This sets the stage for a turbulent weekend for industry chiefs, regulators, central bankers and ministers and government officials before markets reopen Monday morning.
The sale came despite the fact that, late Thursday night, a group of America’s biggest banks came together to pump £25 billion into the First Republic.
There are now serious questions about what can be done to stem the crisis that is engulfing the banking sector as confidence continues to erode.
Investors have strongly criticized the decision to inject aid into the First Republic, saying it was a mistake to expose the country’s biggest lenders to such a risky asset. Bill Ackman of hedge fund management firm Pershing Square said in a tweet that it created “a false sense of trust” in the lender and spread financial contagion.
“This raises more questions than it answers – it’s bad policy,” the investor continued. “I have already said that the hours count. We let days pass. Half measures do not work in a crisis of confidence.
The European Central Bank called an unscheduled meeting yesterday to discuss how to stop the contagion and the state of the banking sector in the eurozone.
The Bank of England said it was monitoring the situation and remained “engaged” with banks and regulators at all times.
But there has been little respite for Credit Suisse as the bank, founded in 1856, has been sued by a group of investors who say it overstated its outlook ahead of this week’s crash.
Swiss authorities are exploring a possible merger with UBS to consolidate Credit Suisse – but it is understood the idea is being pushed back. UBS wants to focus on its own wealth management strategy and is reluctant to take risks related to Credit Suisse, sources say.
Analysts believe that a split from Credit Suisse remains the most likely solution.
Last week, Credit Suisse admitted it had “significant weaknesses” in its reporting and control procedures when releasing its delayed 2022 annual report.
Stuart Cole, chief macroeconomist at liquidity provider Equiti Capital, said: “We are not out of the woods by any means yet.” Craig Erlam, an analyst at Oanda, said: “We need to get through the weekend without more drama.”