Frankfurt March 10 2023: The backbone of Europe’s strong start to 2023 was dealt a blow on Friday as the region’s bank stocks tumbled on concerns that signs of distress at a Californian lender could be an indicator of broader dangers.
The Stoxx 600 Banks Index slumped as much as 4.9% at the open, the biggest drop since June. Germany’s Deutsche Bank AG and Commerzbank AG posted the steepest losses, the former falling more than 9%.
Banks have been at the forefront of Europe’s stock market outperformance in 2023 as rising interest rates boost margins and lenders announce large returns to investors through buybacks and dividends. Optimism toward the sector was dealt a blow late Thursday after Silicon Valley-based SVB Financial Group took steps to shore up its capital position, stoking concern that soaring rates are eroding balance sheets across the financial industry.
SVB slumped 23% in US premarket trading, adding to Thursday’s 60% losses. Other US banks were also poised to extend the previous day’s steep drops, with JPMorgan Chase & Co. and Bank of America Corp. both down 1%.
“It surely shows how nervous the market is after all when problems at a relatively small Californian bank are enough to shake Wall Street’s financial behemoths,” said DWS Group Chief Investment Officer Bjoern Jesch.
Bank Stocks Fall the Most Since 2020 in Wake of SVB’s Nosedive
Adding to the souring sentiment was Silvergate Capital Corp., which said it plans to wind down operations and liquidate after the crypto industry’s meltdown sapped the company’s financial strength.
The KBW Bank Index, which includes US regional lenders, sank 7.7% on Thursday, its biggest drop since June 2020. Financial stocks in Asia followed suit, with the region’s banks falling the most in three years.
