Banks' value drops amid Spain fears
Monday 16 April 2012
Britain's biggest banks lost £2 billion from their combined market value today as fears over Spain's creaking finances saw investors dump financial stocks.
Lloyds Banking Group lost nearly 5% of its value, while Royal Bank of Scotland shed nearly 4% and Barclays fell by more than 1%. HSBC also dipped into the red.
Traders were troubled by developments in Spain, where the Government's implied cost of borrowing is creeping higher towards unsustainable levels amid fears the struggling country will require a bailout from the European Union and its partners.
Banks also fell out of favour after equity analysts at JP Morgan Cazenove downgraded the sector amid concerns over the impact rising funding costs will have on profits.
Rupert Osbourne, futures dealer at IG Index, said: "Spain remains very much front and centre for global markets, as its borrowing costs remain near what many would consider unsustainable levels.
"If there is one thing that we have learnt from the past couple of years of European debt, it is that these problems tend not to be resolved quickly and painlessly - and it does set the stage for potentially more volatility in the weeks ahead."
The yield on Spain's 10-year government bonds hit 6.1%, moving closer to the 7% which forced Greece, Ireland and Portugal to seek financial help from the EU. The rate is at its highest level since the new conservative government took office in December.
The government has implemented a tough austerity package of spending cuts, as well as labour and financial reforms, but investors are concerned by Spain's banks, which are battling with bad loans from a collapsed property market.
The troubles in Spain were flagged by JP Morgan Cazenove as it downgraded the European banking sector from overweight to neutral.
Mislav Matejka, analyst with European equity strategy at JP Morgan Cazenove, said Spanish deposits fell by six billion euro (£4.9 billion) in February and continue to show a negative trend.
Mr Matejka said: "This is particularly worrying and shows that Spanish banks are becoming more and more vulnerable."
He said the bank started the year with a bullish stance at the start of the year, encouraged by the liquidity injection provided by the European Central Bank (ECB).
But he added: "However, most recently the costs have increased again, hurting the profitability outlook for the sector."
- 1 Game of Thrones season 6: Jon Snow theorists believe Ned Stark's son may have a twin sister
- 2 Artist takes LSD, draws herself over different stages of the 9-hour trip to show its effects
- 3 Miley Cyrus address Robin Thicke VMA controversy: ‘He wanted me as naked as possible, but I got the heat because I’m a woman’
- 4 iPhone 6s camera: features to include 4K video camera and flash for selfies
- 5 A pint of water every day is the key to losing weight, scientists say
Miley Cyrus address Robin Thicke VMA controversy: ‘He wanted me as naked as possible, but I got the heat because I’m a woman’
Most expensive city to live in for expatriates: Luanda, Angola takes number one spot with Hong Kong and Zurich in top three
If Surrey were Syria: Social experiment shows what it's like to live under siege
Irish tourist filmed fighting with shopkeepers in Turkey says they 'messed with the wrong man'
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal get peerages
Dresden riots: Protesters in Germany attack refugee buses shouting 'foreigners out'
France train shooting: US soldiers speak of the moment they stopped gunman and 'beat him until he was unconscious'
Labour leadership: Jeremy Corbyn accused of 'deluding' young supporters with 'claptrap'
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...