Shares in European banks slumped on Friday on worries over their health after a series of interest-rate hikes around the world.
The Stoxx Europe 600
SX7P,
banks index dropped over 4%, with shares in Deutsche Bank
DBK,
down 7%, Bank of Ireland
BIRG,
down 6% and HSBC Holdings
HSBA,
falling 5%. On Thursday, the SPDR S&P Regional Banking ETF
KRE,
slumped 8%.
Bank fears have been exacerbated this week by Silvergate Capital
SI,
voluntarily liquidating its banking subsidiary, and Silicon Valley Bank parent SVB Financial
SIVB,
launching a $1.75 billion share sale to plug a hole caused by the sale of a loss-making Treasury securities portfolio.
“This is an issue that could hit all the banks, including the big banks, because the banks amassed a lot of assets since the 2007/2008 financial crisis at rising prices, and they had to pay nearly no compensation for bank deposits, as interest rates have been near zero for such a long time,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Banks that have traditionally borrowed short and lent long are being hurt a deeply inverted yield curve. The 2-year yield
TMUBMUSD02Y,
earlier this week was its most inverted against the 10-year yield
TMUBMUSD10Y,
since 1981. The German 2-year
TMBMKDE-02Y,
yield is also higher than the German 10-year
TMBMKDE-10Y,
Read: 10 banks that may face trouble in the wake of the SVB Financial Group debacle
