Bank stocks plunge resumes as SVB market turmoil continues
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[March 13, 2023] By
Alun John and Rae Wee
LONDON/SINGAPORE (Reuters) - Bank shares in Europe and Asia plunged on
Monday as the United States' move to guarantee the deposits of the
collapsed tech-focused lender Silicon Valley Bank failed to reassure
investors that other banks remain finacially sound.
Europe's STOXX bank index fell 4.3%, having shed 3.78% on Friday,
leaving it on track for its biggest two-day fall since Russia invaded
Ukraine in February 2022.
Commerzbank AG fell as much as 12%, Credit Suisse Group AG was down
almost 11% as lenders across Britain, Italy and Spain also fell.
Trading volumes were also high, running at 160% of the one-month average
for the EURO STOXX 50 according to a note seen by Reuters, while
Europe's volatility index jumped to the highest level since October
2022.
"There is a sense of contagion and where we see a repricing around
financials is leading to a repricing across markets," said Mark Dowding,
chief investment officer, BlueBay Asset Management in London. He said he
did not think that a lot of the issues impacting U.S. banks would be
manifested in European peers.
Bonds held by SVB were "worth next to nothing in a short space of time,
so against that backdrop, that has an effect that is translated on a
more widespread basis," he added.
After a dramatic weekend, U.S. regulators on Sunday stepped in after the
collapse of SVB - the largest U.S. bank failure since 2008, which
suffered a run after a big hit on a portfolio of bonds.
SVB's customers will have access to all their deposits starting Monday
and regulators 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 swiftly to close New York’s Signature Bank SNBY.O,
which had come under pressure in recent days. Smaller banks remained
under pressure with U.S. private bank First Republic Bank plunging
around 50% in pre market, and PacWest down around 26%.
First Republic Bank said on Sunday it had secured additional financing
through JPMorgan Chase, giving it access to a total of $70 billion in
funds through various sources.
EUROPEAN FALLOUT
In Germany, the central bank convened its crisis team on Monday to
assess the possible fallout on the local market, even as no emergency
action was foreseen in Europe.
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People gather outside of the
Silicon Valley Bank (SVB) headquarters in Santa Clara, California,
U.S. March 10, 2023. REUTERS/Nathan Frandino
A senior European supervisor source told Reuters on Monday that the
European Central Bank's Single Supervisory Board had not held any
emergency meeting and was not planning to hold one, with its next
scheduled gathering due to take place on March 23-24.
A spokesman for the ECB, which oversees the biggest banks in the
eurozone, declined to comment while a spokesman for the Banque de
France said it did not have a crisis meeting in the works.
Still, after marathon talks over the weekend, early on Monday in
London HSBC announced it was buying Silicon Valley Bank UK, the
British arm of SVB, for 1 pound ($1.21). It said the subsidiary had
loans of around 5.5 billion pounds and deposits of around 6.7
billion pounds as of March 10.
While SVB UK is small - HSBC's balance sheet exceeds $2.9 trillion -
concerns that SVB's failure would cause Britain's start-up industry
to seize up had prompted calls from the sector for government to
intervene.
MARKETS GYRATE
Meanwhile, a furious race to re-price interest rate expectations
also sent waves through markets as investors bet the Federal Reserve
will be reluctant to hike next week while the mood is febrile and
delicate.
Two-year U.S. Treasury yields were last down 30 bps point at around
4.27% and were set for their biggest three-day slide since 1987,
down a total of 80 bps.SVB's collapse comes alongside the closure of
crypto-focused bank Silvergate, which last week disclosed plans to
wind down operations and voluntarily liquidate, in the aftermath of
FTX's implosion last year.
U.S. banks lost over $100 billion in stock market value late last
week following the collapse, while European banks lost around
another $50 billion in value, according to a Reuters calculation.
(Reporting by Rae Wee in Singapore and Alun John, Amanda Cooper and
Lucy Raitano in London; Additional reporting by Dhara Ranasinghe;
Editing by Sam Holmes, Ed Osmond and Elisa Martinuzzi)
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