Bank stocks are falling again as turmoil in the SVB market continues

LONDON/SINGAPORE, March 13 (Reuters) – Bank stocks in Europe and Asia plummeted Monday as the United States bailed out deposits from collapsed tech-focused lender Silicon Valley Bank, failing to reassure investors that other banks remain financially sound.

The European STOXX banking index (.SX7P) fell 4.3%, after losing 3.78% on Friday, putting it on track for the biggest two-day fall since Russia invaded Ukraine in February 2022.

Commerzbank AG fell as much as 12%, Credit Suisse Group AG fell almost 11% while lenders in Britain, Italy and Spain also fell.

Trading volumes were also high, reaching 160% of the monthly average for the EURO STOXX 50 (.STOXX50E) according to a Reuters report, while the European Volatility Index (.V2TX) jumped to its highest level since October 2022.

“There is a sense of contagion and where we see repricing around financials leading to repricing across all markets,” said Mark Dowding, chief investment officer, BlueBay Asset Management in London. He said he didn’t think many of the problems facing US banks would manifest themselves in European peers.

Bonds from SVB were “worth almost nothing in a short period of time, so against that background, that has an effect that translates on a broader basis,” he added.

After a dramatic weekend, US regulators intervened on Sunday following the collapse of SVB – the largest US bank failure since 2008, which took a run after a major blow to a bond portfolio.

SVB clients will have access to all their deposits from Monday and regulators have set up a new facility to give banks access to emergency funds. The Federal Reserve also made it easier for banks to borrow from it in emergencies.

Regulators also moved quickly to shut down New York’s Signature Bank SNBY.O, which had come under pressure in recent days. Smaller banks continued to be under pressure, with US private bank First Republic Bank (FRC.N) plummeting about 50% in pre-market, and PacWest (PACW.O) down about 26%.

First Republic Bank said on Sunday it had secured additional funding through JPMorgan Chase, giving it access to a total of $70 billion in funds through various sources.

EUROPEAN OUTLET

In Germany, the central bank convened its crisis team on Monday to assess the potential impact on the local market, even though no emergency action was foreseen in Europe.

A senior European regulator source told Reuters on Monday that the European Central Bank’s Joint Supervisory Board had not held an emergency meeting and was not planning to hold one, with the next meeting scheduled for March 23 and 24.

A spokesman for the ECB, which oversees the eurozone’s largest banks, declined to comment, while a Banque de France spokesperson said no crisis meeting is in the works.

Still, following marathon talks over the weekend in London early Monday, HSBC (HSBA.L) announced it would buy Silicon Valley Bank UK, SVB’s UK arm, for £1 ($1.21). It said the subsidiary had loans of about £5.5 billion and deposits of about £6.7 billion as of March 10.

Although SVB UK is small – HSBC’s balance sheet is over $2.9 trillion – concerns that the bankruptcy of the UK start-up industry would stall prompted calls from the industry to intervene.

TURNING MARKETS

Meanwhile, a furious race to reprice interest rate expectations also sent waves through markets as investors bet the Federal Reserve will be reluctant to raise rates next week while the mood is feverish and delicate.

Two-year US Treasury yields last fell 30 basis points to about 4.27% and were poised for the biggest drop in three days since 1987, a total fall of 80 basis points. .N), which last week announced plans to wind down operations and voluntarily liquidate them in the wake of last year’s FTX implosion.

US banks lost more than $100 billion in market capitalization after the collapse late last week, while European banks lost about another $50 billion in value, according to a Reuters calculation.

(This story has been corrected to correct the move of Credit Suisse stock in paragraph 3)

Reporting by Rae Wee in Singapore and Alun John, Amanda Cooper and Lucy Raitano in London; Additional reporting by Dhara Ranasinghe; Edited by Sam Holmes, Ed Osmond and Elisa Martinuzzi

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