Stocks of major US lenders sank, following European banks lower as Credit Suisse Group AG plunged by a record.
(Bloomberg) — Stocks of major US lenders sank, following European banks lower as Credit Suisse Group AG plunged by a record.
Citigroup Inc. and Goldman Sachs Group Inc. were each down more than 4%. The KBW Bank Index dropped by as much as 5.1%, amid slides in Bank of America Corp., JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co.
The slide started with European banks after Saudi National Bank, Credit Suisse’s top shareholder, ruled out providing more financial assistance to the struggling Swiss bank. The STOXX 600 Banks Index was down 7.1% as of 1:32 p.m. London time, while Credit Suisse sank as much as 31%.
Chief Executive Officer Ulrich Koerner on Tuesday preached patience and said the bank’s financial position is sound. Chairman Axel Lehmann said at a conference Wednesday government assistance “isn’t a topic” and the firm’s efforts to return to profitability aren’t comparable to the severe liquidity issues hitting smaller lenders in the US.
The concern over Credit Suisse widened the banking selloff that had been spearheaded by smaller regional lenders after the demise of Silicon Valley Bank, Silvergate Capital Corp. and Signature Bank spurred fears over contagion in the industry as customers pulled funds and investors dumped shares.
The slide in larger banks comes after they have been raking in billions in deposits from new customers after confidence in regional lenders took a hit, with Bank of America adding more than $15 billion in new client funds.
Regulators have taken extraordinary steps to shore up confidence, introducing a backstop for banks to protect the whole nation’s deposits. Meanwhile, the Federal Reserve is considering tougher oversight rules for midsized banks following the turmoil.
Regional banks resumed their decline after a rally Tuesday. First Republic Bank shares were down 14% after it was downgraded into junk by S&P Global Ratings.
“We believe that First Republic’s deposit base is more concentrated than most large U.S. regional banks, which presents heightened funding risks in the current environment,” S&P said in the release.
–With assistance from Blaise Robinson and Ksenia Galouchko.
(Updates shares throughout, adding First Republic in eighth paragraph.)
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